2023 Integrated Report
Energizing
the Future.
Contents
2
President’s Message
5 Message from the Chair
6 Who We Are
11 Where We Are Going
15
How We Are Doing It
M1 Management’s Discussion and Analysis
F1
F13
248
251
253
263
267
271
272
273
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Eleven-Year Financial and Statistical Summary
Plant Summary
Sustainability Performance Indicators
Independent Practitioner’s Assurance Report
Shareholder Information
Shareholder Highlights
Corporate Information
Glossary of Key Terms
1
TransAlta Corporation 2023 Integrated Report Letter from the
President and CEO
John H. Kousinioris
President and Chief Executive Officer
Dear Fellow Shareholders,
to clean energy will have challenges,
Across our sector, 2023 was marked by significant
challenges, ranging from increasing geopolitical risks, high
inflation and rising equipment and capital costs, to financial
industry
setbacks with key equipment suppliers and
participants. In this environment, our industry is demanding
higher returns for projects to better compensate for the
considerable inherent risks of investments. While the
it
transition
represents a significant opportunity for a highly capable,
experienced and flexible company like ours to deliver
growth and innovate in navigating the path forward. The
past year brought to the forefront the “trilemma of
transition” confronting
the global power sector. At
TransAlta, we refer to this as the three-legged stool of
transition. In order to be successful, decarbonization
efforts need to balance affordability, reliability as well as
the reduction of emissions. All three elements need to be
prudently managed to successfully advance and pursue
the transition that is required to meet the challenges of
climate change.
Continuing Exceptional Business Performance
Despite the challenging landscape experienced in 2023, it
for
was another exceptional year of performance
TransAlta. We generated record results for the third year in
a row, with revenues of $3.4 billion and adjusted EBITDA of
$1.6 billion, in line with our adjusted EBITDA record of last
year. We also delivered
to
shareholders of $644 million, a $640 million increase from
2022.
record net earnings
On a free cash flow basis, we generated $890 million or an
impressive $3.22 per share. We exceeded our guidance
expectations for free cash flow, and we increased our
quarterly common share dividend by nine per cent, which
represents our fifth consecutive annual dividend increase. I
am proud to say since 2021 that we have generated an
exceptional $8.93 per share of free cash flow.
2
TransAlta Corporation
2023 Integrated Report
In addition to distributing dividends, we also returned $87
million to shareholders in 2023 through share repurchases.
We will continue to use share repurchases as part of our
capital allocation strategy, which continues to be dynamic
with the changing market landscape and the readiness and
timing of our growth opportunities. It is my view that our
strong free cash flow results and expectations for 2024 are
not appropriately reflected in the current trading price of
our common shares. We have an evergreen normal course
issuer bid in place that we have actively used over the past
several years, and we expect to continue making accretive
share buy backs at this price level.
Our increased common share dividend of $0.24 per
common share, combined with our current intentions
around share repurchases, would see up to approximately
40 per cent of our expected 2024 free cash flow returned
to shareholders.
Our Growth team advanced 678 MW of construction
projects in 2023. We achieved commercial operation at the
130 MW Garden Plain wind facility in Alberta and the 48
MW Northern Goldfields combined solar and battery
storage facilities
in Australia. As for our remaining
construction projects, we expect the 300 MW White Rock
facilities, the 200 MW Horizon Hill facility and the Mount
Keith Transmission Expansion to achieve commercial
operation by the end of the first quarter. Together these
facilities, along with the fully rehabilitated Kent Hills
facilities, are expected to contribute over $175 million in
EBITDA annually.
Finally, I am pleased to say that 2023 was also a record
year for our safety performance. We operated without any
lost time injuries across our global operations and delivered
a Total Recordable Injury Frequency rate of 0.30, an
outstanding result that improved upon our previous best
outcome of 0.39, which was achieved in 2022. Availability
was also excellent across our facilities, at 88.8 per cent
fleet-wide in 2023.
Delivered Structural Simplification and
Strategic Acquisitions
In 2023, we took two key strategic steps forward with the
acquisitions of TransAlta Renewables and Heartland
Generation.
The acquisition of TransAlta Renewables represented a key
milestone for us. It allowed us to simplify our corporate
structure, unify our capital structure and add a net
economic interest in 1.2 GW of generating capacity to our
fleet. The transaction enables us to move forward with a
simplified and unified strategy, positioning us well for
future success.
We also announced an agreement to acquire Heartland
Generation and its entire business operations, representing
approximately 1.8 GW of generation in Alberta and British
Columbia. This acquisition, which remains subject to
regulatory approval, will add highly
flexible and
complementary natural gas assets to our Alberta portfolio.
As the energy transition continues to drive new investment
in renewables, there will also be an increasing need for
low-cost, highly flexible and fast-responding generation to
support grid reliability. The Heartland acquisition supports
the competitive positioning of our fleet to meet current and
future demand for reliable electricity with a robust and
diversified portfolio, while being aligned with our longer-
term emissions reduction commitments. Our commitment
to decarbonization remains unchanged.
Global Leader in Carbon Reductions
We are proud of our decarbonization efforts and are on
track to meet our target of reducing our scope 1 and 2
greenhouse gas emissions by 75 per cent below 2015
levels by 2026. We have retired 4,664 MW of coal-fired
generation capacity since 2018 while converting 1,659 MW
of coal-fired capacity to natural-gas-fired generation.
Comparatively, our converted natural gas units' CO2
intensity is approximately 57 per cent lower than coal
generation. Since 2015, we have reduced scope 1 and 2
greenhouse gas emissions by 21.3 MT CO2e or 66 per cent,
which is an incredible achievement for our fleet.
Prudent Capital Allocation and Investment Discipline
We remain focused on maintaining a balanced, prudent and
disciplined approach to capital allocation with the aim of
generating value for our shareholders. We continue to view
investments
in contracted clean energy assets, and
strategic gas assets, as providing meaningful long-term
shareholder value. We see many opportunities to deploy
capital into higher-returning, longer-life assets, and we are
focusing our efforts on capturing those opportunities over
the next few years.
The path to the energy transition presents tremendous
for our company given our skill set,
opportunities
competitive advantages and market positioning –
opportunities that we are uniquely positioned to capture in
each of our core markets of Canada, the United States and
Australia.
At our Investor Day, we provided an update to our Clean
Electricity Growth Plan goals that laid out a plan to add up
to 1.75 GW of additional clean electricity over the next five
years, by deploying approximately $3.5 billion of growth
capital, for which we have a fully funded plan, to achieve
an annual EBITDA contribution of approximately $350
million.
final
investment decisions, we will
Although we continue to advance a number of projects
toward
remain
disciplined in our investment decisions to ensure we obtain
appropriate risk-adjusted returns for our shareholders.
is
Securing, acquiring and developing great projects
challenging and it is critical that we meet or exceed our
targeted rates of return when we deploy our growth capital
for the benefit of our shareholders. Our Clean Electricity
Growth Plan is an aspirational one. We will not grow simply
for the sake of growth or to meet targets.
Long-term shareholder value creation will ultimately drive
our investment and capital allocation decisions. Our goal is
to enhance shareholder returns, and we will look to
enhance shareholder returns through our dividend and
share repurchases, particularly given the current trading
price of our common shares, which we consider to be
undervalued.
Clean Electricity Growth Plan to 2028
As we execute our plan, we expect that approximately 70
per cent of our adjusted EBITDA will be sourced from clean
generation by the end of 2028 – an amount significantly
higher than the approximately 40 per cent that we have
today. And, as we make the shift, TransAlta will be greener,
more contracted and more diversified.
We see abundant opportunities for the company as the
world increasingly electrifies to meet its growth and
climate change goals. We are in a great position to
succeed over the balance of the decade and beyond, with
considerable optionality in our generating base and growth
pipeline, coupled with our strong balance sheet and
excellent financial outlook.
We see robust demand for renewable energy as corporate
and government sustainability commitments remain firm.
Power purchase agreement prices are responding to
reflect supply and input cost pressures. We continue to
strengthen our development capabilities and competitive
advantages. In 2023, we combined our growth and energy
marketing teams under a single leader while maintaining
focus on our customer advantages in customer delivery,
project development marketing, financing and operational
optimization.
TransAlta Corporation 2023 Integrated Report
3
Our achievements in 2023 would not have been possible
without the collective contributions of all of our employees.
It has been an honour to lead our talented team of
committed, driven and skilled employees who embody our
core values of safety, innovation, sustainability, respect,
and integrity. I thank our employees for all that they do to
ensure that we are powering and empowering our
economies and communities sustainably.
I would also like to express my thanks to our Board of
Directors for the support, guidance and wisdom that they
provide day after day to our company.
We are grateful for the support and confidence of our
shareholders. We greatly value your opinions and put your
interests at the centre of our continued transformation and
the development of our strategy.
Finally, we sincerely appreciate the support of all of
our stakeholders.
I am confident in the future and believe our success will
continue in 2024 and beyond.
John H. Kousinioris
President and Chief Executive Officer
February 22, 2024
Preparing for 2024 and Beyond
fleet
to meet
At TransAlta, we have been working hard to set ourselves
up to meet the needs of a responsible transition. We retain
a cost-effective legacy fleet to maintain affordability, and
we are investing in a diversified, flexible and responsive
generating
reliability
requirements. We are also making investments in zero-
carbon generation and new technologies, while relying less
on our merchant gas generation
further our
decarbonization objectives. As we transition our fleet
towards a greener and more contracted asset base, our
business risk profile will reduce and provide a positive
catalyst to a multiple rerate.
future system
to
In 2024, I will be focusing my efforts on our capital
allocation strategy and ensuring that we return value to our
shareholders through share repurchases and dividends,
while also pursuing growth opportunities with appropriate
returns without compromising our balance sheet strength
and resilience.
Our continuing strong free cash flow will permit us to fund
returns to shareholders and transition TransAlta to a higher
proportion of contracted clean generation. Our portfolio
continues to perform and
is expected to generate
approximately $1.70 per share of free cash flow in 2024,
contributing to our balanced approach. In 2024, we expect
to return up to 40 per cent of free cash flow to our
shareholders through share repurchases and dividends.
We also remain focused on identifying the opportunities
and challenges that will push our company forward in the
second half of the decade and into the 2030s.
4
TransAlta Corporation 2023 Integrated Report
Message from the
Chairman of the Board
John P. Dielwart
Chair of the Board of Directors
Dear Fellow Shareholders,
As we report the financial results for the year ended
December 31, 2023, I cannot overstate the pride I have in
the accomplishments of all of TransAlta’s employees. The
Company, under direction from the Board, simplified
TransAlta’s structure with the acquisition of TransAlta
Renewables, expanded its renewable portfolio with the
commercial operation of our Garden Plain and Northern
Goldfields facilities, and solidified its Alberta strategy
through
of
announced
Heartland Generation.
acquisition
the
The Company continues to manage its evolution for the
benefit of our shareholders. We have reported another
year of superior results that went well beyond the original
expectations we had at the beginning of 2023. Our
management team delivered another year of exceptional
shareholders, achieved
free cash
record-setting safety results, continued to reduce our
emissions ahead of targets and deployed our capital in a
disciplined and prudent way throughout the year. TransAlta
has delivered performance at all
financial,
operational, safety and sustainability.
for our
levels:
flow
creation will drive our investment decisions and we remain
committed to our prudent capital allocation approach. To
the extent we deploy reduced growth capital, we will
pursue enhanced shareholder returns through dividends
(base and/or special) and share repurchases.
The Board would like to express our gratitude to the
employees and capable leadership of TransAlta for their
significant efforts in delivering another great year for the
Company. The team has adapted to changing market
conditions and will seek to add value to the Company in a
disciplined and prudent way while being extremely mindful
of capital allocation discipline and the creation of
shareholder value.
We also send special thanks to all of our shareholders for
their ongoing commitment to the Company and for their
continued engagement. As fellow shareholders, we look
forward to TransAlta’s execution in 2024 and we value
your engagement and viewpoints on our evolving strategy.
The Board of Directors will strive to increase shareholder
value
the
management team to assess new opportunities that will
add value to the Company and improve performance.
continuous engagement with
through
The Company’s evolving strategy continues to provide
exceptional results and 2023’s record-setting performance
reflect the success of that execution. We continue to
transition the company through our Clean Electricity
Growth Plan and are well-positioned as a credible and
sought-after developer of choice for customers in all three
core geographies in which we operate.
We announced ambitious growth targets at our recent
Investor Day that would see our company transition over
time to one that has 70 per cent of its adjusted EBITDA
clean and contracted. Our strategy is directed towards
in our portfolio by 2028.
achieving material growth
However, growth is challenging and it is not easy to
develop projects to deliver the targeted rates of return we
have set for the deployment of our capital. As a result, we
will remain disciplined in the deployment of our capital and
we will not grow for the sake of growth even if it means we
do not achieve our 2028 targets. Creating shareholder
value trumps growth. We will maintain discipline as we
consider our growth aspirations and rates of return for
growth projects. Acquisitions must also meet our target
thresholds for value creation. Long-term shareholder value
Finally, on behalf of the Board of Directors, I would like to
extend my deep gratitude to the Honourable Rona
Ambrose for her service to the Company. She has
announced that she will not stand for re-election and will
retire from the Board following the annual shareholders’
meeting on April 25, 2024. She has been a valuable
contributor to our Board since 2017 and we thank her for
her leadership and insights during her tenure, especially as
the Chair of the Governance, Safety and Sustainability
Committee of the Board.
John P. Dielwart
Chair of the Board of Directors
February 22, 2024
TransAlta Corporation 2023 Integrated Report
5
Kananaskis, Alberta
Who We Are
TransAlta owns, operates and develops a diverse fleet of electrical power generation
assets in Canada, the United States and Australia with a focus on long-term
shareholder value.
6
TransAlta Corporation 2023 Integrated Report A leader in clean electricity
committed to a sustainable
future and a responsible
energy transition
Our Mission
Provide safe, low-cost and reliable
clean electricity
Our Values
Safety
Innovation
Sustainability
Respect
Integrity
7
TransAlta Corporation 2023 Integrated ReportWho We Are Overview
Wind and Solar
Hydro
Natural Gas
TransAlta at a Glance
TransAlta provides municipalities, medium and large
industries, businesses and utility customers with clean,
affordable, energy efficient and reliable power. Today,
TransAlta is one of Canada’s largest producers of wind
power and Alberta’s largest producer of hydro-electric
power. For over 112 years, TransAlta has been a responsible
operator and a proud member of the communities where
we operate and where our employees work and live.
~5.3 GW
Development Pipeline
High-quality, diverse projects
across Canada, the United
States and Australia
112 years
Generation Experience
The foundation of our
focused strategy
66%
~1,260
Reduction in emissions
Since 2015
Employees
Central to value creation
Energy Marketing
6,400 MW
76
Portfolio
A highly diversified portfolio of
high-quality assets.
Generating Facilities
In Canada, the United
States and Australia
Development
Pipeline and
Capabilities
8
TransAlta Corporation 2023 Integrated ReportWho We Are LEGEND
Wind
Solar
Hydro
Battery
Natural Gas
Wind under construction
Energy Transition
Pipeline
Australia
Canada
United States
TransAlta Energy Australia
is
building on our over 25-year history
in the country with significant new
investments made over the past
several years.
We began in Alberta over 112 years
ago with the construction of our first
hydro facility. Today, our operations
span
the
the country, providing
electricity Canadians need every day.
Our United States operations
began in Centralia, Washington.
Since then, our US fleet has
expanded to include gas, hydro,
solar and wind generation.
1996
1911
First facility commissioned
First plant commissioned
498 MW
Gross installed capacity
9 Facilities
Currently operating
5,044 MW
Gross installed capacity
57 Facilities
Currently operating
2000
First facility acquired
1,219 MW
Gross installed capacity
10 Facilities
Currently operating
9
TransAlta Corporation 2023 Integrated ReportWho We Are Development Pipeline
Early and Advanced Stage
500 MW
Australia
3.2 GW
Canada
2.7 GW
United States
Prospects
3.0 GW
LEGEND
Advanced
Early
Prospects
* Prospects as of December 31, 2023.
PLEASE NOTE: Prospects are subject to change. There is no certainty that the prospects indicated
on the map above will move forward to early and advanced stage projects.
10
TransAlta Corporation 2023 Integrated ReportWho We Are Northern Goldfields, Western Australia
Where We Are Going
We believe the current decade will be one of significant clean energy expansion and
opportunities, and we are excited about the role that TransAlta will play. We have a
proven track record along with the expertise and experience to meet the challenge.
11
TransAlta Corporation 2023 Integrated Report Clean Electricity Growth Plan
to 2028
Up to
1.75 GW
Clean electricity
2024
$350 million
New annual EBITDA
$3.5 billion
Growth capex
2028
10 GW
Development pipeline
Our investment focus to 2028
Renewables and storage
Responsive and flexible generation
New technologies
Evolution of the Company
Renewables
Contracted
Capacity
(MW)*
Adjusted EBITDA
(%)
Capacity
(MW)
Adjusted EBITDA
(%)
+67%
+61%
+90%
+177%
LEGEND
Renewables
Gas
Contracted
Merchant
70%
42%
72%
Energy Marketing
Energy Transition
26%
2023
2028
2023
2028
2023
2028
2023
2028
*
Includes Horizon Hill, White Rock, the Clean Electricity Growth Plan and assets from the Heartland acquisition.
12
TransAlta Corporation 2023 Integrated ReportWhere We Are Going Financial Highlights
Adjusted EBITDA1
($ millions)
1,286
984
917
1,634 1,632
2019
2020
2021
2022
2023
2023 Adjusted EBITDA by Segment2
($ millions)
$1,748
26% Hydro
46% Gas
15% Wind and Solar
6% Energy Marketing
7% Energy Transition
Free Cash Flow1
($ millions)
Free Cash Flow per Share1
($)
961
890
435
348
585
3.55
3.22
1.54
1.27
2.16
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Earnings (Loss) before Income Taxes
($ millions)
Cash Flow from Operating Activities
($ millions)
880
1,464
849
702
1,001
877
193
353
(303)
(380)
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
(1) Non-IFRS measure. See pages M48 to M58.
(2) Excludes the results from the Corporate segment and our equity investments.
13
TransAlta Corporation 2023 Integrated ReportWhere We Are Going Hydro
Wind and Solar
Year ended Dec. 31
2023
2022
2021
Year ended Dec. 31
2023
2022
2021
Installed capacity (MW)1
922
922
925
Installed capacity (MW)1
2,084
1,906
1,906
Production (GWh)
1,769
1,988
1,936
Production (GWh)
4,243
4,248
3,898
Ancillary volumes (GWh)
2,582
3,124
2,897
Revenues2
Gross margin3
Adjusted EBITDA3
529
510
459
607
585
527
383
367
322
Revenues2
Gross margin3
Adjusted EBITDA3
373
343
257
407
375
311
348
331
262
Gas
Energy Transition
Year ended Dec. 31
2023
2022
2021
Year ended Dec. 31
2023
2022
2021
Installed capacity (MW)1
3,084
3,084
3,084
Installed capacity (MW)1
671
671
1,472
Production (GWh)
11,873
11,448
10,565
Production (GWh)
4,144
3,574
5,706
Revenues2
Gross margin3
Adjusted EBITDA3
1,525
1,521
1,126
964
801
801
629
634
488
Revenues2
Gross margin3
Adjusted EBITDA3
746
189
122
724
159
86
728
236
133
Energy Marketing
Corporate
Year ended Dec. 31
2023
2022
2021
Year ended Dec. 31
2023
2022
2021
Revenues2
Adjusted EBITDA3
152
109
218
183
202
166
OM&A
Adjusted EBITDA3
(115)
(116)
(101)
(102)
(84)
(85)
Consolidated
Year ended Dec. 31
2023
2022
2021
Installed capacity (MW)1
6,761
6,583
7,387
Total production (GWh)
22,029
21,258
22,105
Revenues4
3,355
2,976
2,721
Adjusted EBITDA3
1,632
1,634
1,286
(1) Gross installed capacity.
(2)
(3)
For details of the adjustments to revenues included in adjusted EBITDA refer to the Additional IFRS and Non-IFRS Measures section of the MD&A.
Adjusted EBITDA and gross margin are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS and Non-IFRS Measures
section of the MD&A. See pages M48 to M52.
In accordance with IFRS.
(4)
14
TransAlta Corporation 2023 Integrated ReportWhere We Are Going Windrise, Alberta
How We Are Doing It
As a customer-centred clean electricity leader, we are well-positioned to support
the ESG and sustainability goals of our customers through a responsible energy
transition. Our strategy focuses on renewable electricity growth, reliability and a deep
commitment to sustainability. We believe we are uniquely positioned as the world
continues to electrify and adopt sustainability practices.
15
TransAlta Corporation 2023 Integrated Report Sustainability Targets
Achieving Results
Our 2023 and longer-term sustainability targets support the long-term success of our
business so that the Company will continue to be positioned as an ESG leader in the future.
We establish goals and targets to improve our ESG performance and to manage both current
and emerging material sustainability issues.
Nine UN SDGs we support
2023 ESG Highlights
Our performance against a selection of 2023 sustainability targets is highlighted below:
ENVIRONMENT
GHG emissions reduction
SOCIAL
Workforce diversity
GOVERNANCE
Board diversity
Absolute
2015
Baseline
75%
2026
goal
Gender
0
40%
2030
goal
Gender
0
50%
2030
goal
Down 66% from baseline
27% women
46% women
16
TransAlta Corporation 2023 Integrated ReportHow We Are Doing It Clean Electricity Transition
Delivering on our Clean Electricity Growth Plan
We are focused on achieving tangible greenhouse gas emissions reductions. We have adopted a
net-zero by 2045 target and an ambitious CO2 emissions reduction target of 75% by 2026 from
2015 levels.
TransAlta GHG Emissions (million tonnes CO2)
Composition of Generation Fleet
32.2
10.2 10.9
2015 2022
2023
8.1
2026
Target
0
2045
Target
14% Hydro
45% Gas
31% Wind and Solar
10% Energy Transition
Installed Renewable Capacity (MW)
Renewable Growth Capital1 ($ millions)
Wind
Solar
Hydro
~5,000
2,392 2,469
2,803 2,800 2,978
2019
2020
2021
2022
2023
2028 Target
(1) See page M92 of the MD&A for details.
158
326
666
630
2020
2021
2022
2023
3,500
2024-2028
Cumulative Total
(Target)
17
TransAlta Corporation 2023 Integrated ReportHow We Are Doing It 04_427079-1_gfx_sustainable future timeline
Committed to a Sustainable Future
Committed to a Sustainable Future
Achieving Net Zero by 2045
2020
2021
2025
2026
2030
2035
2040
2045
2021–2026
Retired last coal unit in Canada in 2021
Replaced 800 MW of gas generation with
800 MW of renewables under our Clean
Electricity Growth Plan (“the Plan”)
Updated the Plan to add 1.75 GW of
renewables by 2028
Retiring last coal unit at the end of 2025
2026–2030
Continue delivering the Plan
2030–2045
Continued growth in renewables
Introduction of net-zero technologies
Net Zero
18
Energy Innovation Outlook
(Technologies being explored)
TransAlta fleet EV pilot
WaterCharger 180 MW lithium-ion
battery storage
Commercial hydrogen
hubs and turbines
Tent Mountain pumped
hydro storage
Brazeau pumped storage
Commercial small modular
fission reactors
Commercial
fusion reactors
TransAlta Corporation 2023 Integrated ReportHow We Are Doing It 04_427079-1_gfx_culture
Culture
Enhancing the employee
experience
to
• Listening
our
employees, evolving
the future of work
Supporting health and wellbeing
• Raising awareness by becoming thriving
corporate athletes
Cultural
Transformation
Journey
Increasing connection
and collaboration
• Building culture champions
Enhancing employee psychological safety
Driving results and recognition
• Creating a culture of results, learning and
• Rewarding performance and
purpose through speaking up
increasing engagement
Community Investment
In 2023, TransAlta contributed approximately $3.2 million in donations and sponsorships.
United Way
Calgary Health Foundation
Centralia Coal Transition Board
contractors
In 2023, TransAlta employees,
retirees,
the
Company raised over $1.5 million for
the United Way across Canada and
the US.
and
the
In 2023, TransAlta donated
final $200,000 of
its $2 million
commitment to develop a Neonatal
Intensive Care Unit at Foothills
Medical Centre
to serve all of
southern Alberta.
Since 2012, TransAlta has been
supporting community investments
in the arts, colleges and in programs
to support displaced workers under
a US$55 million commitment
to
Washington State.
19
TransAlta Corporation 2023 Integrated ReportHow We Are Doing It Awards & Recognition
TransAlta has been recognized in recent years for our performance as a responsible operator
and proud community member where we work and live. Our ESG performance continues to
be celebrated.
TransAlta Corporation ranked
first on Newsweek’s inaugural
Trustworthy
World’s Most
Companies 2023 list for the
Energy and Utilities category.
TransAlta Corporation received
an A-, which is in the Leadership
band. This is above the thermal
power generation sector average
of B.
TransAlta Corporation received a
score of AA, which is the second-
highest rating given by MSCI on
ESG-related business practices.
TransAlta Corporation
received
three awards for best overall
(mid-cap) in the utilities sector,
best ESG reporting (mid-cap) and
best innovation
in shareholder
communications.
Bloomberg Gender-Equality
Index (2020 to 2023)
Human Resources Director – Best
Places to Work Award (2023)
Electricity Canada’s Women
in Electricity Award (2023)
Diversio certified for our Equity,
Diversity and Inclusion program
Energy Intelligence Green
Utilities Report (2020 to
2023)
Alberta Business Awards 2023
– Health and Wellness Award
of Distinction
United Way Thanks a Million
Recipient (2001-2023)
Canadian Occupational Safety
– Canada’s Safest Employers
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TransAlta Corporation 2023 Integrated ReportHow We Are Doing It TRANSALTA CORPORATION
Management’s Discussion
and Analysis
This Management’s Discussion and Analysis (“MD&A”) contains forward-looking statements. These statements are based
on certain estimates and assumptions and involve risks and uncertainties. Actual results may differ materially. Refer to the
Forward-Looking Statements section of this MD&A for additional information.
Table of Contents
M2
M4
M6
Forward-Looking Statements
Description of the Business
Highlights
M11 Capital Expenditures
M59 Key Non-IFRS Financial Ratios
M59 2024 Outlook
M62 Material Accounting Policies and Critical Accounting
Estimates
M67 Accounting Changes
M12
Significant and Subsequent Events
M67
Environmental, Social and Governance
M15
Segmented Financial Performance and Operating
Results
M69 Accelerating Our Business Transformation with a Target
to Become Net-Zero by 2045
M23 Performance by Segment with Supplemental
M70 Our 2023 Sustainability Performance
Geographical Information
M23 Optimization of the Alberta Portfolio
M72
2024+Sustainability Targets
M26 Fourth Quarter Highlights
M75 Decarbonizing Our Energy Mix
M28 Segmented Financial Performance and Operating
M81
Key Climate Scenario Findings
Results for the Fourth Quarter
M29 Selected Quarterly Information
M84 Managing Climate Change Risks and Opportunities
M31
Strategy and Capability to Deliver Results
M94 Enabling Innovation and Technology Adoption
M31
Strategic Priorities and Clean Electricity Growth Plan
to 2028
M97
Engaging with Our Stakeholders to Create
Positive Relationships
M36 Financial Position
M37
Financial Capital
M42 Cash Flows
M103 Building a Diverse and Inclusive Workforce
M106 Progressive Environmental Stewardship
M112 Delivering Reliable and Affordable Energy
M44 Other Consolidated Analysis
M113 Sustainability Governance
M46 Financial Instruments
M114 Governance and Risk Management
M48 Additional IFRS Measures and Non-IFRS Measures
M125 Disclosure Controls and Procedures
This MD&A should be read in conjunction with our 2023 audited annual consolidated financial statements (the "consolidated financial statements")
and our 2023 Annual Information Form ("AIF"), each for the fiscal year ended Dec. 31, 2023. In this MD&A, unless the context otherwise requires,
“we”, “our”, “us”, the “Company” and “TransAlta” refer to TransAlta Corporation and its subsidiaries. The consolidated financial statements have
been prepared in accordance with International Financial Reporting Standards (“IFRS”) for Canadian publicly accountable enterprises as issued by
the International Accounting Standards Board (“IASB”) and in effect at Dec. 31, 2023. All tabular amounts in the following discussion are in millions
of Canadian dollars unless otherwise noted, except amounts per share, which are in whole dollars to the nearest two decimals. This MD&A is
dated Feb. 22, 2024. Additional information respecting TransAlta, including our AIF for the year ended Dec. 31, 2023, is available on SEDAR+ at
www.sedarplus.ca, on EDGAR at www.sec.gov and on our website at www.transalta.com. Information on or connected to our website is not
incorporated by reference herein.
TransAlta Corporation 2023 Integrated Report
M1
Forward-Looking Statements
current
referred
conditions
to herein as
This MD&A includes "forward-looking information" within
the meaning of applicable Canadian securities laws and
"forward-looking statements" within
the meaning of
applicable United States securities laws, including the
Private Securities Litigation Reform Act of
1995
"forward-looking
(collectively
statements"). All forward-looking statements are based on
our beliefs as well as assumptions based on information
available at the time the assumption was made and on
management's experience and perception of historical
future
expected
trends,
developments, as well as other
factors deemed
appropriate
the circumstances. Forward-looking
statements are not facts, but only predictions and
generally can be identified by the use of statements that
include phrases such as "may", "will", "can", "could",
"would", "shall", "believe", "expect", "estimate", "anticipate",
"intend", "plan", "forecast", "foresee", "potential", "enable",
terminology. These
"continue" or other comparable
statements are not guarantees of our future performance,
events or results and are subject to risks, uncertainties and
other
important factors that could cause our actual
performance, events or results to be materially different
from
the
in
forward-looking statements.
implied
those
and
out
set
by
or
in
average
interest,
including, but not
this MD&A contains
forward-looking
In particular,
limited to, statements
statements
relating to: the acquisition of Heartland (as defined below)
and its entire business operations in Alberta and British
Columbia,
including closing conditions and regulatory
approvals pursuant to the Heartland acquisition and the
anticipated timing and completion of the acquisition; the
annual
taxes,
earnings before
depreciation and amortization ("EBITDA") to be generated
from the Heartland acquisition and other benefits expected
to arise from such transaction; the Company’s 2024
Outlook,
including Adjusted EBITDA, free cash flow,
annualized dividend per share, sustaining capital and
energy marketing gross margin; the Company’s expanded
growth targets to deliver 1.75 GW with a target investment
of $3.5 billion by 2028 which is anticipated to deliver
annual EBITDA of $350 million; the expansion of the
Company's development pipeline to 10 GW by 2028; the
Company’s investment strategy to deliver long-term value
to shareholders; the common share dividend level through
2024;
the Company's projects under construction,
including capital costs, the timing of commercial operations
and expected annual EBITDA; the impact of new asset
additions in 2024 of Garden Plain, Northern Goldfields
solar, Kent Hills, Mount Keith transmission, White Rock and
Horizon Hill; the development of the early-stage and
advanced-stage projects; achieving
the anticipated
benefits of the transfer of PTCs (defined below) generated
M2
TransAlta Corporation 2023 Integrated Report
from the White Rock and Horizon Hill wind projects;
the Joint
executing growth with Hancock under
Development Agreement; the proportion of EBITDA to be
generated from renewable sources to increase to 70 per
cent by the end of 2028; the Company’s ability to achieve
its long-term decarbonization goal to be net zero by 2045;
the reduction of carbon emissions by 75 per cent from
2015 emissions levels by 2026; the expected impact and
quantum of carbon compliance costs;
regulatory
developments and their expected impact on the Company;
expectations regarding refinancing debt; and the Company
continuing to maintain adequate liquidity.
The forward-looking statements contained in this MD&A
are based on many assumptions including, but not limited
to, the following: no significant changes to applicable laws
and regulations beyond those that have already been
announced; no significant changes to fuel and purchased
power costs; no material adverse impacts to long-term
investment and credit markets; no significant changes to
power price and hedging assumptions, including hedged
volumes and prices; no significant changes to gas
commodity prices and transport costs; no significant
changes to decommissioning and restoration costs; no
significant changes to
interest rates; no significant
changes to the demand and growth of renewables
generation; no significant changes to the integrity and
reliability of our assets; planned and unplanned outages
and use of our assets; and no significant changes to the
Company's debt and credit ratings.
Forward-looking statements are subject to a number of
significant risks and uncertainties that could cause actual
plans, performance, results or outcomes to differ materially
from current expectations. Factors that may adversely
impact what is expressed or implied by forward-looking
statements contained in this MD&A include risks relating to:
fluctuations in power prices, including merchant pricing in
Alberta, Ontario and Mid-Columbia; failure or delay in
closing the Heartland acquisition; failure to realize the
benefits of the Heartland acquisition, including the inability
to advance the Battle River Carbon Hub Project to final
investment decision or commercial operation, and any loss
of value in the Heartland portfolio during the interim period
prior to closing; reductions in production; restricted access
to capital and increased borrowing costs, including any
difficulty raising debt, equity or tax equity, as applicable,
on reasonable terms or at all; labour relations matters,
reduced labour availability and the ability to continue to
staff our operations and facilities; reliance on key
personnel; disruptions to our supply chains, including our
ability to secure necessary equipment; force majeure
claims; our ability to obtain regulatory and any other third-
party approvals on the expected timelines or at all in
respect of our growth projects; long-term commitments on
made only as of the date hereof and we do not undertake
to publicly update these forward-looking statements to
reflect new information, future events or otherwise, except
as required by applicable laws. The purpose of the financial
outlooks contained herein is to give the reader information
about management's current expectations and plans and
readers are cautioned that such information may not be
appropriate for other purposes. In light of these risks,
forward-looking
uncertainties and assumptions,
statements might occur to a different extent or at a
different time than we have described, or might not occur
at all. We cannot assure that projected results or events
will be achieved.
the
to
the
inability
systems,
including
legislative,
receivables;
the energy
cybersecurity
the Company’s
the effectiveness of
gas transportation capacity that may not be fully utilized
over time; adverse financial impacts arising from the
Company's hedged position;
risks associated with
development and construction projects, including as it
pertains to increased capital costs, permitting, labour and
engineering risks, disputes with contractors and potential
delays in the construction or commissioning of such
projects; significant fluctuations in the Canadian dollar
against the US dollar and Australian dollar; changes in
short-term and long-term electricity supply and demand;
counterparty credit risk and any higher rate of losses on
our accounts
to achieve our
environmental, social and governance ("ESG") targets; the
impact of
transition on our business;
impairments and/or writedowns of assets; adverse impacts
on our information technology systems and our internal
threats;
control
commodity risk management and energy trading risks,
including
risk
management tools associated with hedging and trading
procedures to protect against significant losses; our ability
to contract our generation for prices that will provide
expected returns and to replace contracts as they expire;
changes
regulatory and political
environments in the jurisdictions in which we operate;
environmental requirements and changes in, or liabilities
under, these requirements; disruptions in the transmission
and distribution of electricity; the effects of weather,
including man-made or natural disasters and other climate-
change related risks; increases in costs; reductions to our
generating units’ relative efficiency or capacity factors;
disruptions in the source of fuels, including natural gas,
coal, water, solar or wind resources required to operate our
risks, unplanned outages and
facilities; operational
equipment failure and our ability to carry out or have
completed any repairs in a cost-effective or timely manner
or at all; failure to meet financial expectations; general
domestic and
international economic and political
developments, including armed hostilities, the threat of
terrorism, adverse diplomatic developments or other similar
events; industry risk and competition in the business in
which we operate; structural subordination of securities;
public health crisis risks; inadequacy or unavailability of
insurance coverage; our provision for income taxes and
legal, regulatory and
any risk of reassessment; and
contractual disputes and proceedings
the
Company. The foregoing risk factors, among others, are
described
in the Governance and
Risk Management section of this MD&A and the Risk
Factors section in our AIF for the year ended Dec. 31,
2023.
in further detail
involving
Readers are urged to consider these factors carefully when
evaluating the forward-looking statements, which reflect
the Company's expectations only as of the date hereof and
are cautioned not to place undue reliance on them. The
forward-looking statements included in this document are
TransAlta Corporation 2023 Integrated Report
M3
Description of the Business
TransAlta is a Canadian corporation and one of Canada's
largest publicly traded power generators. Established in
1911, the Company now has over 112 years of operating
experience in the development, production and sale of
electricity. We own, operate and manage a geographically
diversified portfolio of generation assets that include
water, wind, solar, battery storage, natural gas and
transition coal. We are one of the largest producers of wind
power in Canada and the largest producer of hydro power
in Alberta. We also have industry-leading energy marketing
capabilities where we seek to maximize margins by
securing and optimizing high-value products and markets
for ourselves and our customers in dynamic market
conditions. Our mix of merchant and contracted assets
along with our energy marketing business provides resilient
and growing cash flows that support our ability to pay
dividends to our shareholders and reinvest in growth.
The Company's goal is to be a leading clean electricity
company that is committed to a sustainable future and a
responsible energy transition. Our strategic priorities
include accelerating growth
into customer-centred
renewables and storage, selectively expanding flexible
generation and reliability assets to support the transition,
defining the next generation of power solutions and
maintaining
financial strength and capital allocation
discipline. We are primarily focused on opportunities within
our core markets of Canada, the US and Western Australia.
Our sustainability goals and our Clean Electricity Growth
Plan remain the focus of our strategy, which includes our
commitment to retire our last remaining operational coal
facility at the end of 2025. We remain on track to achieve
our 2026 greenhouse gas ("GHG") emissions reduction
target of 75 per cent scope 1 and 2 GHG emissions
reductions since 2015 and our carbon net-zero goal by
2045. Since 2005, we have reduced our scope 1 and 2
GHG emissions by 31 million tonnes ("MT") of CO2e or a 74
per cent reduction, proudly representing approximately 10
per
of Canada's Paris Agreement 2030
decarbonization target(1).
cent
Portfolio of Assets
Our asset portfolio
is geographically diversified with
operations across Canada, the United States and Australia.
The portfolio also generates power using a diverse set
generation technologies and reliably supplies a broad cross
section of counterparties.
Our Hydro, Wind and Solar, Gas and Energy Transition
segments are responsible for operating and maintaining
our electrical generation facilities. Our Energy Marketing
segment is responsible for marketing and scheduling our
merchant asset fleet in North America (excluding Alberta)
along with the procurement of gas, transport and storage
for our gas fleet, providing knowledge to support our
growth team, and generating a stand-alone gross margin
separate from our asset business through a leading North
American energy marketing and trading platform.
Our highly diversified portfolio consists of both high-quality
contracted assets and merchant assets. Approximately,
56 percent of our total installed capacity, including 81 per
cent of our Wind and Solar fleet and 53 per cent of our Gas
fleet, is contracted with investment-grade or creditworthy
counterparties. The weighted-average contract life for
these contracted facilities is 10 years.
Our merchant assets include our unique hydro merchant
portfolio and our merchant legacy thermal portfolio and
wind assets. Our merchant exposure is primarily in Alberta,
where 53 per cent of our capacity is located and 75 per
cent of our Alberta capacity is available to participate in the
merchant market. The Alberta optimization team
is
responsible for marketing and scheduling our merchant
asset fleet in Alberta.
A significant portion of the thermal generation capacity in
the portfolio has been hedged
to provide cash
flow certainty. The Company's hedging strategy includes
maintaining a significant base of commercial and industrial
customers and is supplemented with financial hedges. In
2023, 78 per cent of our energy production in Alberta was
sold under long term contracts or fixed price hedges. Refer
to the 2024 Outlook section and the Optimization of the
Alberta Portfolio of this MD&A for further details.
Our diversified fleet is a key success factor in our ability to
deliver
flows while capturing higher
risk-adjusted returns for our shareholders.
resilient cash
(1)
In 2005, TransAlta's estimated scope 1 and 2 GHG emissions were 41.9 MT of CO2e, which did not receive independent limited assurance. Canada's
Paris Agreement 2030 decarbonization target assumed 293 MT of CO2e or a 40 per cent reduction from a 2005 baseline of 732 MT of CO2e.
M4
TransAlta Corporation 2023 Integrated Report
The following table provides our consolidated ownership of our facilities across the regions in which we operate as of
Dec. 31, 2023:
Year ended
Dec. 31, 2023
Alberta
Canada, excluding
Alberta
US
Australia
Total
Hydro
Wind & Solar
Gas
Energy Transition
Total
Gross
Installed
Capacity
(MW)
Number of
facilities
Gross
Installed
Capacity
(MW)(1)
Number of
facilities
Gross
Installed
Capacity
(MW)(1)
Number of
facilities
Gross
Installed
Capacity
(MW)
Number of
facilities
Gross
Installed
Capacity
(MW)(1)
Number of
facilities
834
88
—
—
17
7
—
—
766
751
519
48
14
1,960
9
7
3
645
29
450
7
3
1
6
922
24
2,084
33
3,084
17
—
—
671
—
671
—
—
2
—
2
3,560
1,484
1,219
498
6,761
38
19
10
9
76
(1) Gross installed capacity for consolidated reporting represents 100 per cent output of a facility. Capacity figures for the Wind and Solar segment includes
100 per cent of the Kent Hills wind facilities, and capacity figures for the Gas segment include 100 per cent of the Ottawa and Windsor facilities, 100 per
cent of the Poplar Creek facility, 50 per cent of the Sheerness facility and 60 per cent of the Fort Saskatchewan facility.
Stable and Predictable Cash Flows
The following table provides our contracted capacity by MW and as a percentage of total gross installed capacity of our
facilities across the regions in which we operate as of Dec. 31, 2023:
As at Dec. 31, 2023
Alberta
Canada, excluding Alberta
US
Australia
Total contracted capacity (MW)
Hydro
Wind &
Solar
—
88
—
—
88
374
751
519
48
1,692
1,635
Gas
511
645
29
450
Energy
Transition
—
—
381
—
381
57%
Total
885
1,484
929
498
3,796
56%
Contracted capacity as a % of total capacity (%)
10%
81%
53%
The weighted average contract life (years) of our facilities across the regions in which we operate as of Dec. 31, 2023 is:
As at Dec. 31, 2023
Alberta(1)(2)
Canada, excluding Alberta(2)
US(2)
Australia(2)
Total weighted contract life (years)(2)
Hydro
Wind &
Solar
Energy
Transition
Gas
Total
—
10
—
—
10
16
10
10
15
12
7
8
2
15
10
—
—
2
—
2
11
9
7
15
10
(1) The weighted-average remaining contract life in the Wind and Solar segment is related to the contract period for Garden Plain (130 MW), McBride Lake
(38 MW), and Windrise (206 MW). The weighted-average remaining contract life in the Gas segment is related to the contract period for Poplar Creek
(230 MW), Fort Saskatchewan (71 MW) and a capacity-contract that is not directly contracted with any one facility (210 MW).
(2) For power generated under long-term power purchase agreements ("PPAs") and other long-term contracts, the weighted-average remaining contract
life is based on long-term average gross installed capacity.
The majority of TransAlta's
creditworthy counterparties.
long-term power purchase agreements are with
investment-grade
rated or
TransAlta Corporation 2023 Integrated Report
M5
Highlights
For the year ended Dec. 31, 2023, the Company
demonstrated strong performance mainly due to the
continued strong market conditions in Alberta in the first
half of the year, higher production in the Gas and Energy
Transition segments, and higher hedged volumes and
lower realized gas prices in the Gas segment, partially
offset by lower wind and water resources. The Energy
Marketing segment's performance was lower compared to
2022 due to the lower realized settled trades during the
year on market positions compared to the prior year.
Year ended Dec. 31
Operational information
Adjusted availability (%)
Production (GWh)
Select financial information
Revenues
Earnings (loss) before income taxes
Adjusted EBITDA(1)
Net earnings (loss) attributable to common shareholders
Cash flows
Cash flow from operating activities
Funds from operations(1)
Free cash flow(1)
Per share
2023
2022
2021
88.8
90.0
86.6
22,029
21,258
22,105
3,355
2,976
880
1,632
644
1,464
1,351
890
353
1,634
4
877
1,346
961
2,721
(380)
1,286
(576)
1,001
994
585
Weighted average number of common shares outstanding
276
271
271
Net earnings (loss) per share attributable to common shareholders,
basic and diluted
Dividends declared per common share
Funds from operations per share(1)(2)
Free cash flow per share(1)(2)
Liquidity and capital resources
Available liquidity
Adjusted net debt to adjusted EBITDA(1) (times)
Total consolidated net debt(1)(3)
As at Dec. 31
Total assets
Total long-term liabilities
Total liabilities
2.33
0.22
4.89
3.22
0.01
0.21
4.97
3.55
(2.13)
0.19
3.67
2.16
1,738
2,118
2.5
2.2
2,177
2.6
3,453
2,854
2,636
2023
2022
8,659
10,741
5,253
6,995
5,864
8,752
2021
9,226
4,702
6,633
(1) These items are not defined and have no standardized meaning under IFRS. Presenting these items from period to period provides management and
investors with the ability to evaluate earnings (loss) trends more readily in comparison with prior periods’ results. Refer to the Segmented Financial
Performance and Operating Results section of this MD&A for further discussion of these items, including, where applicable, reconciliations to measures
calculated in accordance with IFRS. Also, refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
(2) Funds from operations ("FFO") per share and free cash flow ("FCF") per share are calculated using the weighted average number of common
shares outstanding during the period. Refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A for the purpose of these
non-IFRS ratios.
(3) Refer to the table in the Financial Capital section of this MD&A for more details on the composition of total consolidated net debt.
M6
TransAlta Corporation 2023 Integrated Report
Operating Performance
Adjusted Availability
The following table provides adjusted availability (%) by segment:
Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition(1)
Adjusted availability (%)
2023
90.8
86.9
91.6
79.8
88.8
2022
96.7
83.8
94.6
79.0
90.0
2021
92.4
91.9
85.7
78.8
86.6
(1) Availability, not adjusted for dispatch optimization, was 79.8 per cent for the year ended Dec. 31, 2023 (2022 - 77.2 per cent; 2021 - 75.3 per cent).
Availability is an important measure for the Company as it
represents the percentage of time a facility is available to
produce electricity and is therefore an important indicator
of the overall performance of the fleet.
Adjusted availability for the year ended Dec. 31, 2023, was
88.8 per cent, compared to 90.0 per cent in 2022, and was
consistent with management's expectations. Lower
adjusted availability was primarily due to:
Availability is impacted by planned and unplanned outages,
including the extended outage at the Kent Hills wind facility
within the Wind and Solar fleet. Availability adjusted to
exclude the Kent Hills extended outage for the years
ended Dec. 31, 2022 and 2023, was 91.0 per cent and 92.8
per cent, respectively. The Company schedules dedicated
time (planned outages) to maintain, repair or make
improvements to the facilities at a time that will minimize
the impact to the operations. In high price environments,
actual outage schedules may change to accelerate the
return to service of the unit.
Production and Long-Term Average Generation
• Planned outages
Alberta
our
scheduled maintenance and
in the Hydro segment, mainly at
perform
Hydro
Assets,
to
• Planned outages at Sundance Unit 6, Sheerness Unit 1,
Keephills Units 2 and 3 and Sarnia for scheduled
maintenance in the Gas segment, partially offset by
• Lower planned outages at Centralia Unit 2 in the Energy
Transition segment and
• The partial
return
to service of
the Kent Hills
wind facilities.
2023
2022
2021
Year ended Dec. 31
Actual
production
(GWh)
LTA
generation
(GWh)
Production
as a % of
LTA
Actual
production
(GWh)
LTA
generation
(GWh)
Production
as a % of
LTA
Actual
production
(GWh)
LTA
generation
(GWh)
Production
as a % of
LTA
Hydro
1,769
2,015
Wind and Solar
4,243
5,387
88%
79%
1,988
2,015
99%
1,936
2,030
4,248
4,950
86%
3,898
4,345
95%
90%
Gas
Energy Transition
11,873
4,144
Total
22,029
11,448
3,574
21,258
10,565
5,706
22,105
In addition to adjusted availability, the Company utilizes
("LTA generation") as
long-term average production
another indicator of performance for the renewable assets
whereby actual production levels are compared against the
expected long-term average. In the short term, for each of
the Hydro and Wind and Solar segments, the conditions
will vary from one period to the next. Over longer
durations, facilities are expected to produce in line with
their long-term averages, which is considered a reliable
indicator of performance.
LTA generation is calculated on an annualized basis from
the average annual energy yield predicted from our
simulation model based on historical resource data
performed over a period of typically greater than 25 years.
LTA generation for Energy Transition is not considered as
we are currently transitioning these units with the
expectation that they will retire by the end of 2025 and the
LTA generation for Gas is not applicable as these units are
dispatchable and their production is largely dependent on
market conditions and merchant demand.
TransAlta Corporation 2023 Integrated Report
M7
Total production for 2023, increased by 771 GWh or 4 per
cent compared to 2022.
Production from the Centralia facility within the Energy
Transition segment benefited from fewer planned and
unplanned outage hours compared to the prior year and
was able to be dispatched during periods of higher
merchant pricing for the region.
The Company's Gas segment had a strong performance,
resulting in production that was both higher than the prior
year as well as higher than expectations for the year. The
Gas segment was available during periods of supply
tightness, allowing for the Company to operate during
periods of peak pricing. The Gas segment was
unfavourably impacted by relatively mild weather in the
fourth quarter of 2023, as the Company did not experience
the same weather conditions compared to the same period
in 2022, which had tighter supply due to the extreme cold
weather in Alberta.
Production for our renewables assets for the year ended
Dec. 31, 2023, was lower by 224 GWh, or 4 per cent,
compared to 2022 and was 81 per cent of LTA generation.
Lower than average renewable resources in the year
impacted production in both the Hydro and the Wind and
Solar segments. Hydro production was further impacted by
lower availability due to increased planned maintenance
outages compared to 2022, while the Wind and Solar
impacted by the
segment production was positively
addition of the Garden Plain wind facility, the partial return
to service of the Kent Hills wind facility and the addition of
the Northern Goldfields solar facilities during the year.
Market Pricing
Year ended Dec. 31, 2023
Alberta spot power price ($/MWh)
Mid-Columbia spot power price (US$/MWh)
Ontario spot power price ($/MWh)
Natural gas price (AECO) per GJ ($)
For the year ended Dec. 31, 2023, spot electricity prices in
Alberta and the Pacific Northwest were lower compared to
2022. Lower prices in both regions resulted from lower
natural gas prices and overall weaker weather-driven
demand in the second half of 2023, with notably lower
prices due to above normal weather patterns in the fourth
quarter of 2023. For Alberta specifically, warm weather in
2023
2022
2021
134
76
28
162
82
47
102
49
30
2.54
5.08
3.39
the fourth quarter resulted in a strong wind resource
pattern which, combined with new installed capacity,
added supply in the market compared to the prior year.
AECO natural gas prices for the year ended Dec. 31, 2023,
were lower compared to 2022 mainly due to improved
production
and
North America.
in Alberta
storage
levels
and
Financial Performance review on Consolidated Information
Year ended Dec. 31
Revenues
Fuel and purchased power
Carbon compliance
Operations, maintenance and administration
Depreciation and amortization
Asset impairment charges (reversals)
Interest income
Earnings (loss) before income taxes
Income tax expense
Net earnings (loss) attributable to common shareholders
Net earnings attributable to non-controlling interests
M8
TransAlta Corporation 2023 Integrated Report
2023
3,355
1,060
112
539
621
(48)
59
880
84
644
101
2022
2,976
1,263
78
521
599
9
24
353
192
4
111
2021
2,721
1,054
178
511
529
648
11
(380)
45
(576)
112
income
Interest
increased by
$35 million, or 146 per cent, compared to 2022, primarily
due to higher cash balances and favourable interest rates.
totalling $59 million
Earnings before income taxes totalling $880 million,
increased by $527 million, or 149 per cent, compared to
2022, due to the above noted items.
relating
Income tax expense totalling $84 million, decreased by
$108 million, or 56 per cent, compared to 2022, due to a
recovery
reversal of previously
the
derecognized Canadian deferred tax assets and lower US
non-deductible expenses relating to the US operations,
from
partially
Canadian operations.
earnings
higher
offset
by
to
Net earnings attributable to non-controlling interests
totalling $101 million, decreased by $10 million, or 9 per
cent, compared to 2022, primarily due to lower net
earnings for TA Cogen.
Current Year Variance Analysis (2023 versus 2022)
totalling $3,355 million,
Revenues
increased by
$379 million, or 13 per cent, compared to 2022, primarily
due to:
• Higher realized and unrealized gains from hedging and
the segments, partially
derivative positions across
offset by
• Lower revenue from merchant sales due to lower spot
power prices and production in Alberta.
Fuel and purchased power costs totalling $1,060 million,
decreased by $203 million, or 16 per cent, compared to
2022, primarily due to:
• Lower natural gas commodity pricing, partially offset by
• Higher
fuel usage
Transition segments.
in both
the Gas and Energy
Carbon compliance costs totalling $112 million, increased
by $34 million, or 44 per cent, compared to 2022, primarily
due to:
• An increase in the carbon price per tonne from $50 per
tonne in 2022 to $65 per tonne in 2023,
• Higher production in the Gas segment and
• No utilization of emission credits
to settle GHG
obligations as was done in the prior year.
Operations, maintenance and administration ("OM&A")
expenses totalling $539 million, increased by $18 million,
or 3 per cent, compared to 2022, primarily due to:
• Higher spending on strategic and growth initiatives,
• Higher costs associated with the relocation of the
Company's head office and
• Increased costs due to inflationary pressures.
Depreciation and amortization totalling $621 million,
increased by $22 million, or 4 per cent, compared to 2022,
primarily due to:
• Revisions to useful lives on certain facilities and
• Commercial operation of new facilities.
impairment
Asset
totalling $48 million,
increased by $57 million, or 633 per cent, compared to an
asset impairment charge in 2022, primarily due to:
reversals
• Decommissioning and restoration provisions for retired
assets being favourably impacted by a change in timing
of expected cash outflows, partially offset by lower
discount rates, resulting in a net impairment reversal of
$34 million and
• A Hydro segment impairment reversal of $10 million due
to a contract extension and favourable changes in power
price assumptions.
TransAlta Corporation 2023 Integrated Report
M9
Adjusted EBITDA
For the year ended Dec. 31, 2023, the Company's adjusted EBITDA was $1,632 million as compared to $1,634 million in
2022, a decrease of $2 million. The major factors impacting adjusted EBITDA are summarized in the following table:
Adjusted EBITDA for the year ended Dec. 31, 2022
Hydro: lower primarily due to lower ancillary services volumes, lower spot power and ancillary services
prices and lower than average water resources, partially offset by realized gains from hedging and sales
of environmental attributes.
Wind and Solar: lower primarily due to lower environmental attribute revenues, lower spot power
pricing in Alberta, lower wind resource across the operating fleets, lower liquidated damages
recognized at the Windrise wind facility and higher OM&A, partially offset by the commercial operation
of the Garden Plain wind facility, the Northern Goldfields solar facilities and the partial return of service
of the Kent Hills wind facilities.
Gas: higher primarily due to higher power price hedges partially offsetting the impacts of lower Alberta
spot prices, lower natural gas commodity costs and higher production, partially offset by lower thermal
revenues, higher carbon prices and higher carbon costs and fuel usage related to production. The Gas
fleet significantly exceeded management's expectations.
Energy Transition: higher primarily due to higher production from higher availability and higher
merchant sales volumes, partially offset by lower market prices compared to the prior year.
Energy Marketing: lower primarily due to lower realized settled trades during the year on market
positions in comparison to prior year and higher OM&A. Energy Marketing results were in line with
management's expectations and performance was consistent with our revised full year financial
guidance provided in the second quarter of 2023.
Corporate: lower primarily due to increased spending to support strategic and growth initiatives and
higher costs associated with the relocation of the Company's head office.
Adjusted EBITDA(1) for the year ended Dec. 31, 2023
Year ended
Dec. 31
1,634
(68)
(54)
172
36
(74)
(14)
1,632
(1) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
M10
TransAlta Corporation 2023 Integrated Report
Free Cash Flow
During the second quarter of 2023, the Company revised
and increased our 2023 guidance for FCF based on the
strong financial performance attained in the first half of the
year and our expectations for the balance of the year. For
the year ended Dec. 31, 2023, the Company's FCF
decreased by $71 million, or 7 per cent, compared to 2022,
and was in line with our revised expected full year financial
impacting FCF are
factors
guidance. The major
summarized in the following table:
FCF for the year ended Dec. 31, 2022
Lower adjusted EBITDA: lower FCF due to the items noted in Adjusted EBITDA above.
Higher interest income: Higher cash balances and favourable interest rates positively impacting FCF.
Lower current income tax expense: Previously restricted non-capital loss carryforwards were utilized to
offset taxable income resulting in higher FCF.
Higher sustaining capital expenditures: Higher planned major maintenance costs for the Hydro and Gas
segments, partially offset by lower planned major maintenance in Wind and Solar and Energy Transition
segments, resulting in lower FCF.
Higher distributions paid to subsidiaries' non-controlling interests: Related to timing of distributions paid
to TA Cogen, partially offset by lower distributions paid to TransAlta Renewables resulting in lower FCF.
Lower provisions: Lower provisions being accrued compared to the prior year, with no notable
settlements being recorded in either year resulting in lower FCF due to the timing of provisions accrued.
Other non-cash items(1)
Other(2)
FCF(3) for the year ended Dec. 31, 2023
Year ended
Dec. 31
961
(2)
35
15
(31)
(36)
(26)
(12)
(14)
890
(1) Other non-cash items consists of Alberta market pool incentives, carbon obligation, contract liabilities, and the SunHills royalty onerous contract. Refer
to the Reconciliation of Cash Flow from Operations to FFO and FCF section tables in this MD&A for more details.
(2) Other consists of higher realized foreign exchange loss, higher decommissioning and restoration costs settled, higher dividends paid on preferred
shares and higher principal payments on lease liabilities. Refer to the Reconciliation of Cash Flow from Operations to FFO and FCF section tables in this
MD&A for more details.
(3) FCF is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
Capital Expenditures
We are in a long-cycle, capital-intensive business that requires significant capital expenditures. Our goal is to undertake
sustaining capital expenditures that ensure our facilities operate reliably and safely.
Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Corporate
2023
2022
2021
41
15
76
15
27
35
18
41
19
29
26
13
128
19
13
199
Total sustaining capital expenditures
174
142
Total sustaining capital expenditures in 2023 were $32
million higher compared to 2022, primarily due to:
• Higher planned major maintenance at our Alberta
Hydro Assets,
• Higher planned major maintenance at our Sarnia,
Sundance Unit 6 and Keephills Units 2 and 3 facilities in
the Gas segments, partially offset by
• Lower planned major maintenance in the Wind and Solar
segment primarily due to a reduction in major component
replacements and
• Lower planned outage work performed in the Energy
Transition segment.
TransAlta Corporation 2023 Integrated Report
M11
Total sustaining capital expenditures
$57 million lower compared to 2021, primarily due to:
in 2022 were
• Coal-to-gas conversions being completed
in 2021,
partially offset by
• Higher planned major maintenance in 2022 in the Hydro
segment and a higher
level of major component
replacements in 2022 in the Wind and Solar segment and
Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Corporate(1)
• Higher spend on leasehold improvements associated
the Company's
relocation of
the planned
with
head office.
2023
2022
2021
6
659
13
—
61
2
759
3
—
10
3
124
38
70
47
282
Total growth and development expenditures
739
774
(1) Expenditures related to projects in the development phase are included in the Corporate segment.
In 2023 and 2022,
expenditures incurred primarily related to:
the growth and development
• The Horizon Hill wind project, which is expected to reach
commercial operation in the first quarter of 2024; and
• The Garden Plain wind
facility, which achieved
• The Mount Keith 132kV expansion, which is on track to
commercial operation in August 2023;
be completed in the first quarter of 2024.
• The Northern Goldfields solar facilities, which achieved
commercial operation in November 2023;
Refer to the Strategic Priorities and Clean Electricity
Growth Plan to 2028 section of this MD&A for more details.
• The White Rock wind projects, which are expected to
reach commercial operation in the first quarter of 2024;
Significant and Subsequent Events
Change to Board of Directors
The Honourable Rona Ambrose has decided that she will
not stand for re-election and will retire from the Board of
Directors ("the Board") following the annual shareholder
meeting on April 25, 2024. The Board extends its gratitude
for her service to the Company. She has been a valuable
contributor to the Board since 2017 and we thank her for
her leadership and insights during her tenure, especially as
Chair of the Governance, Safety and Sustainability
Committee of the Board.
Production Tax Credit ("PTC")
Sale Agreements
On Feb. 22, 2024, the Company entered into 10-year
transfer agreements with an AA- rated customer for the
sale of approximately 80 per cent of the expected PTCs to
be generated from the White Rock wind projects and the
Horizon Hill wind project. The expected annual average
EBITDA from these contracts is approximately $57 million
(US$43 million).
M12
TransAlta Corporation 2023 Integrated Report
Normal Course Issuer Bid ("NCIB") and
Automatic Share Purchase Plan ("ASPP")
On May 26, 2023, the Toronto Stock Exchange ("TSX")
accepted the notice filed by the Company to implement an
NCIB for a portion of its common shares. Pursuant to the
NCIB, TransAlta may repurchase up to a maximum of
14,000,000 common shares, representing approximately
7.29 per cent of its public float of common shares as at
May 17, 2023. Purchases under the NCIB may be made
through open market transactions on the TSX and any
alternative Canadian trading platforms on which the
common shares are traded, based on the prevailing market
price. Any common shares purchased under the NCIB will
be cancelled. The period during which TransAlta
is
authorized to make purchases under the NCIB commenced
on May 31, 2023, and ends on May 30, 2024, or such
earlier date on which the maximum number of common
shares are purchased under the NCIB or the NCIB is
terminated at the Company’s election.
On Dec. 19, 2023, the Company entered into an ASPP to
facilitate repurchases of TransAlta’s common shares under
its NCIB.
• A focus on customer-centred renewables and storage
through the development of its 4.8 GW development
pipeline and
Under the ASPP, the Company’s broker may purchase
common shares from the effective date of the ASPP until
the end of the ASPP. All purchases of common shares
made under the ASPP will be included in determining the
number of common shares purchased under the NCIB. The
ASPP will terminate on the earliest of the date on which: (a)
the maximum purchase limits under the ASPP are reached;
(b) Feb. 24, 2024; or (c) the Company terminates the ASPP
in accordance with its terms.
During the year ended Dec. 31, 2023, the Company
purchased and cancelled a total of 7,537,500 common
shares, at an average price of $11.49 per common share,
for a total cost of $87 million.
The NCIB provides the Company with a capital allocation
alternative with a view to ensuring long-term shareholder
value. TransAlta’s Board of Directors and management
believe that, from time to time, the market price of the
common shares might not be reflective of the underlying
value and purchases of common shares for cancellation
under the NCIB may provide an opportunity to enhance
shareholder value.
Northern Goldfields Solar Achieves
Commercial Operation
On Nov. 22, 2023, the Company announced that the
48 MW Northern Goldfields solar and battery storage
facilities achieved commercial operation. The facilities
consist of the 27 MW Mount Keith solar facility, the 11 MW
Leinster solar facility, the 10 MW Leinster battery energy
transmission
storage
infrastructure, all of which are now
into
TransAlta’s existing 169 MW Southern Cross Energy North
remote network in Western Australia. The facilities are fully
contracted to BHP Nickel West for a term of 15 years and
are expected to reduce BHP's scope 2 emissions at Mount
Keith and Leinster by 12 per cent annually.
interconnecting
integrated
system
and
TransAlta Announces Growth Targets to
2028 and Declares 9% Dividend Increase
On Nov. 21, 2023, the Company held its 2023 Investor Day
event and announced it had updated its strategic growth
targets to 2028, which strengthens the Company’s
commitment to being a leader in clean electricity by
delivering customer-centred power solutions. The growth
targets include:
• Adding up to 1.75 GW of new capacity to the Company's
fleet by investing approximately $3.5 billion to develop,
construct or acquire new assets through to the end
of 2028,
• Expanding the Company’s development pipeline to 10 GW
by 2028.
The Board approved an annualized $0.02 per share
increase, or 9 per cent increase to our common share
dividend and declared a dividend of $0.06 per common
share to be paid on April 1, 2024. The quarterly dividend of
$0.06 per common share represents an annualized
dividend of $0.24 per common share.
TransAlta Enters Joint Development
Agreement with Hancock
(“Hancock”), Australia’s
On Nov. 21, 2023, the Company entered into a joint
development agreement with Hancock Prospecting Pty
Ltd.
iron ore
producer. This arrangement will build on TransAlta’s
expertise in supplying power to remote mining operations
in Western Australia. TransAlta will work collaboratively
with Hancock to define and supply behind-the-fence
generation solutions for Hancock in the Port Hedland area.
largest
fourth
TransAlta to Acquire Heartland Generation
from Energy Capital Partners
On Nov. 2, 2023, the Company announced that it had
entered into a definitive share purchase agreement with an
affiliate of Energy Capital Partners, the parent of Heartland
Generation Ltd. and Alberta Power
(2000) Ltd.
(collectively, "Heartland"), pursuant to which TransAlta will
acquire Heartland and its entire business operations in
Alberta and British Columbia. The acquisition will add 10
facilities to TransAlta’s fleet, totalling 1,844 MW of new
capacity. The transaction is expected to close in the first
half of 2024, subject to customary closing conditions,
including receipt of regulatory approvals.
The purchase price for the acquisition is $390 million,
subject to working capital and other adjustments, as well
as the assumption of $268 million of low-cost debt. The
Company will finance the transaction using cash on hand
and drawing on its credit facilities.
annual
average
The assets are expected to add approximately $115 million
synergies.
EBITDA
of
Approximately 55 per cent of revenues are under contract
with highly creditworthy counterparties, with a weighted-
average remaining contract life of 16 years. Corporate pre-
tax synergies are expected to exceed $20 million annually.
including
The acquisition will competitively position the Company to
respond to the highly dynamic and shifting electricity
landscape
in Alberta given the expected significant
large baseload
increase
generation coming online in the next several years in the
renewables and other
in
TransAlta Corporation 2023 Integrated Report
M13
Pipeline Corporation and PepsiCo Canada, with a weighted
average contract life of approximately 17 years.
Tent Mountain Pumped Hydro
Development Project
On April 24, 2023, the Company acquired a 50 per cent
interest in the Tent Mountain Renewable Energy Complex
(“Tent Mountain”), an early-stage 320 MW pumped storage
hydro development project located in southwest Alberta,
from Evolve Power Ltd. ("Evolve"), formerly known as
Montem Resources Limited. The acquisition includes land
rights, fixed assets and intellectual property associated
with Tent Mountain.
The Company and Evolve own the Tent Mountain project
jointly
within a special purpose partnership that
managed, with the Company acting as project developer.
The partnership is actively seeking an offtake agreement
for the energy and environmental attributes that will be
generated by the facility.
is
Annual Shareholder Meeting
On April 28, 2023, the Company held its annual meeting of
shareholders. All director nominees were elected to the
Board, including Candace MacGibbon, a new member to
the Board.
The Company also received strong support on all other
including say-on-pay and an
items of business,
amendment to the Company's Share Unit Plan.
province. The Clean Electricity Growth Plan continues to be
at the heart of our strategy and is primarily focused on
meeting the future needs of our customers with clean
electricity solutions.
TransAlta Corporation Completes
Acquisition of TransAlta Renewables Inc.
On Oct. 5, 2023, the Company completed the acquisition
of TransAlta Renewables pursuant to the terms of the
previously announced arrangement agreement between
the parties (the "Arrangement"). TransAlta acquired all of
the outstanding common shares of TransAlta Renewables
("RNW Shares") not already owned, directly or indirectly,
by TransAlta and certain of its affiliates, resulting in
TransAlta Renewables becoming a wholly owned
subsidiary of the Company. Prior to the Arrangement,
TransAlta and its affiliates collectively held 160,398,217
RNW Shares, representing 60.1 per cent of the issued and
outstanding RNW Shares, with the remaining 106,510,884
RNW Shares held by TransAlta Renewables shareholders
("RNW Shareholders") other
and
its affiliates.
than TransAlta
The Arrangement was approved by RNW Shareholders at a
special meeting of shareholders held on Sept. 26, 2023,
and by the Court of King’s Bench of Alberta on Oct. 4,
2023. The consideration paid totalled $1.3 billion which
consisted of $800 million of cash and approximately 46
million common shares of the Company.
The closing of the acquisition of TransAlta Renewables
represents a key milestone for the Company and the
simplified and unified corporate structure positions it well
for future success.
TransAlta Tops Newsweek's Inaugural List
of World's Most Trustworthy Companies
On Sept. 14, 2023, the Company announced that it ranked
first on Newsweek's inaugural “World's Most Trustworthy
Companies 2023” list for the Energy and Utilities category.
The list identifies the top 1,000 companies in 21 countries
and across 23 industries. Newsweek’s 2023 World’s Most
Trustworthy Companies were chosen based on a holistic
approach to evaluating three pillars of public trust –
customers, investors and employees. The list was compiled
based on an extensive survey of over 70,000 participants,
gathering 269,000 evaluations of companies that people
trust as a customer, as an investor or as an employee.
Garden Plain Wind Facility Achieved
Commercial Operation
In August 2023, the Garden Plain wind facility was
commissioned adding 130 MW to our gross installed
capacity. The facility is fully contracted with Pembina
M14
TransAlta Corporation 2023 Integrated Report
Segmented Financial Performance and Operating Results
Segmented information is prepared on the same basis that the Company manages its business, evaluates financial results
and makes key operating decisions. The following table reflects the summary financial information on a consolidated basis
for the year ended Dec. 31:
Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Energy Marketing
Corporate
Total adjusted EBITDA(1)
Earnings (loss) before income taxes
Adjusted EBITDA(1)
2023
2022
2021
459
257
801
122
109
(116)
1,632
880
527
311
629
86
183
(102)
1,634
353
322
262
488
133
166
(85)
1,286
(380)
(1) This item is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
TransAlta Corporation 2023 Integrated Report
M15
Hydro
Year ended Dec. 31
Gross installed capacity (MW)(1)
LTA generation (GWh)(2)
Availability (%)
Production
Contract production (GWh)
Merchant production (GWh)
Total energy production (GWh)
Ancillary service volumes (GWh)(3)
Alberta Hydro Assets revenues(4)(5)
Other Hydro Assets and other revenues(4)(6)
Alberta Hydro ancillary services revenues(3)
2023
2022
Change
2021
Change
922
922
2,015
2,015
—
—
— %
925
(3)
— %
— % 2,030
(15)
4.3
(1) %
5 %
90.8
96.7
(5.9)
(6) %
92.4
277
323
(46)
(14) %
434
(111)
(26) %
1,492
1,665
(173)
(10) %
1,502
1,769
1,988
(219)
(11) %
1,936
2,582
3,124
(542)
(17) % 2,897
163
52
227
291
328
(37)
(11) %
185
143
51
42
9
21 %
41
173
236
(63)
(27) %
160
1
76
—
11 %
3 %
8 %
77 %
2 %
48 %
— %
57 %
Environmental attribute revenues
14
1
13
1300 %
1
Total gross revenues
529
607
(78)
(13) %
387
220
Net payment relating to Alberta Hydro PPA
—
—
—
— %
(4)
4
(100) %
Revenues(7)
Fuel and purchased power
Gross margin(8)
OM&A
Taxes, other than income taxes
Adjusted EBITDA(8)
Supplemental Information:
Gross revenues per MWh
529
607
(78)
(13) %
383
224
58 %
19
22
(3)
(14) %
16
6
38 %
510
585
(75)
(13) %
367
218
59 %
48
3
55
3
(7)
—
(13) %
42
— %
3
13
—
459
527
(68)
(13) %
322
205
31 %
— %
64 %
Alberta Hydro Assets energy ($/MWh)(4)(5)
Alberta Hydro Assets ancillary ($/MWh)(3)
175
67
197
76
(22)
(11) %
(9)
(12) %
123
55
74
21
60 %
38 %
(1)
In the fourth quarter of 2022, the Company closed the sale of two Hydro assets resulting in a reduction in capacity of 3 MW.
(2) 2022 and 2021 LTA generation revised for consistency with calculation methodology used in 2023.
(3) Ancillary services as described in the AESO Consolidated Authoritative Document Glossary.
(4) Alberta Hydro Assets include 13 hydro facilities on the Bow and North Saskatchewan river systems. Other Hydro assets includes our hydro facilities in
BC and Ontario, hydro facilities in Alberta (other than the Alberta Hydro Assets) and transmission revenues.
(5) The Company entered into forward hedges for the first and third quarter of 2023 that are included in the Alberta Hydro Asset revenues.
(6) Other revenue includes revenues from our transmission business and other contractual arrangements, including the flood mitigation agreement with the
Government of Alberta and Black Start services.
(7) For details of the adjustments to revenues included in adjusted EBITDA refer to the Additional IFRS and Non-IFRS Measures section of this MD&A.
(8) Adjusted EBITDA and gross margin are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS and Non-IFRS Measures
section of this MD&A.
M16
TransAlta Corporation 2023 Integrated Report
2023
2022
Revenues for the year ended Dec. 31, 2023, decreased
compared to 2022, primarily due to:
Revenues for the year ended Dec. 31, 2022, increased
compared to 2021, primarily due to:
• Lower ancillary services volumes due to the AESO
procuring lower volumes given its decision to reduce the
cumulative volume of imports into Alberta,
• Lower spot power prices and ancillary services prices in
the Alberta market and
• Lower production due to lower availability from planned
outages at our Alberta Hydro Assets and lower than
average water resources, partially offset by
• Realized gains from our hedging strategy for the Alberta
Hydro Assets and
• Sales of environmental attributes driven by an increase in
emission credit sales.
Adjusted EBITDA for the year ended Dec. 31, 2023,
decreased compared to 2022, primarily due to:
• Lower revenues as explained by the factors above.
For further discussion on the Alberta market conditions and
pricing, refer to the Alberta Electricity Portfolio section of
this MD&A.
• Higher merchant and ancillary service prices and volumes
in the Alberta market,
• Higher production and higher availability due to lower
planned and unplanned outages at our Alberta Hydro
Assets and
• Higher ancillary service volumes due to higher availability
and demand.
Adjusted EBITDA for the year ended Dec. 31, 2022,
increased compared to 2021, primarily due to:
• Higher revenues as explained by the factors above,
partially offset by
• Higher OM&A costs for the year related to increased
insurance premiums for updated replacement value
coverage and
the Company's performance-related
incentive accruals.
TransAlta Corporation 2023 Integrated Report
M17
Wind and Solar
Year ended Dec. 31
2023
2022
Change
2021
Change
Gross installed capacity (MW)(1)
2,084
1,906
178
9 %
1,906
—
LTA generation (GWh)
5,387
4,950
437
9 % 4,345
605
— %
14 %
Availability (%)
Production
Contract production (GWh)
Merchant production (GWh)
Total production (GWh)
Wind and Solar revenues
Environmental attribute revenues
Revenues(2)
Fuel and purchased power
Carbon compliance
Gross margin(3)
OM&A
Taxes, other than income taxes
Net other operating income(2)
Adjusted EBITDA(3)
Supplemental information:
86.9
83.8
3.1
4 %
91.9
(8.1)
(9) %
3,095
3,182
(87)
(3) % 2,850
332
12 %
1,148
1,066
4,243
4,248
82
(5)
8 %
1,048
18
— % 3,898
350
347
26
373
30
—
357
50
407
31
1
(10)
(3) %
320
(24)
(48) %
28
(34)
(8) %
348
(1)
(1)
(3) %
(100) %
17
—
1
100 %
343
375
(32)
(9) %
331
44
80
12
68
12
(6)
(16)
12
—
10
18 %
— %
(63) %
59
10
—
(16)
(100) %
257
311
(54)
(17) %
262
49
19 %
37
22
59
14
9
2
2 %
9 %
12 %
79 %
17 %
82 %
13 %
15 %
20 %
Kent Hills wind rehabilitation expenditures(4)
Insurance proceeds - Kent Hills
87
(1)
77
(7)
10
6
13 %
(86) %
—
—
77
100 %
(7)
(100) %
(1) Gross installed capacity and availability for 2023 includes the 130 MW Garden Plain wind facility that achieved commercial operation in August 2023 and
the 48 MW Northern Goldfields solar facilities that achieved commercial operation in November 2023.
(2) For details of the adjustments to revenues and net other operating income included in adjusted EBITDA, refer to the Additional IFRS Measures and Non-
IFRS Measures section of this MD&A.
(3) Adjusted EBITDA and gross margin are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS and Non-IFRS Measures
section of this MD&A.
(4) The Kent Hills wind facilities rehabilitation capital expenditures are segregated from the sustaining capital expenditures due to the extraordinary nature
of the expenditures.
M18
TransAlta Corporation 2023 Integrated Report
2023
2022
Revenues for the year ended Dec. 31, 2023, decreased
compared to 2022 primarily due to:
Revenues for the year ended Dec. 31, 2022, increased
compared to 2021, primarily due to:
• Lower environmental attribute revenues driven by a
reduction of offsets and emission credit sales,
• Lower spot power pricing in Alberta and
• Weaker than long-term average wind resource across the
operating fleets, partially offset by
• Commercial operation of the Garden Plain wind facility
and the Northern Goldfield Solar facilities in the third and
fourth quarter, respectively and
• The partial
return
to service of
the Kent Hills
wind facilities.
Adjusted EBITDA for the year ended Dec. 31, 2023,
decreased compared to the same period in 2022, primarily
due to:
• Lower revenues as explained by the factors above,
• Higher OM&A related to salary escalations, higher
long-term service agreement
insurance costs and
escalations and
• Higher production from the addition of the Windrise wind
facility and the acquisition of the North Carolina Solar
facilities in the fourth quarter of 2021 and higher wind
resources in Eastern Canada,
• Higher realized merchant and spot power pricing in
Alberta and
• Higher environmental attribute
revenue, partially
offset by
• Lower availability as a result of the extended outage at
the Kent Hills 1 and 2 wind facilities.
Adjusted EBITDA for the year ended Dec. 31, 2022,
increased compared to 2021, primarily due to:
• Higher revenue as explained by the factors above and
• The recognition of liquidated damages recoverable from
turbine availability being below the contractual target at
the Windrise wind facility, partially offset by
• Higher fuel and purchased power from increases in
• Lower liquidated damages recognized at the Windrise
transmission rates,
wind facility.
• Higher OM&A related to the addition of the Windrise wind
and North Carolina Solar facilities during the year and
• A one-time favourable adjustment as a result of the AESO
transmission line loss ruling that was included in 2021.
TransAlta Corporation 2023 Integrated Report
M19
Gas
Year ended Dec. 31
2023
2022
Change
2021
Change
Gross installed capacity (MW)
3,084
3,084
—
— % 3,084
91.6
94.6
(3.0)
(3) %
85.7
4,172
3,609
7,889
7,927
563
(38)
16 % 3,622
(13)
— % 7,084
843
(188)
(88)
(100)
114 %
(141)
53
(38) %
—
8.9
— %
10 %
— %
12 %
Availability (%)
Production
Contract sales volume (GWh)
Merchant sales volume (GWh)
Purchased power (GWh)(1)
Total production (GWh)
11,873
11,448
425
4 % 10,565
883
8 %
Revenues(2)
Fuel and purchased power(2)
Carbon compliance
Gross margin(3)
OM&A
Taxes, other than income taxes
Net other operating income
Adjusted EBITDA(3)
1,525
1,521
4
— %
1,126
(188)
(30) %
374
395
263
35 %
70 %
449
112
964
192
11
(40)
801
637
83
801
195
15
(38)
29
163
(3)
(4)
(2)
35 %
118
(35)
(30) %
20 %
634
(2) %
173
(27) %
13
5 %
(40)
167
22
2
2
26 %
13 %
15 %
(5) %
629
172
27 %
488
141
29 %
(1) Power required to fulfill contractual obligations during planned and unplanned outages is included in purchased power.
(2) For details of the adjustments to revenues and fuel and purchased power included in adjusted EBITDA, refer to the Additional IFRS Measures and Non-
IFRS Measures section of this MD&A.
(3) Adjusted EBITDA and gross margin are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
2023
2022
Revenues for the year ended Dec. 31, 2023, increased
compared to 2022, primarily due to:
Revenues for the year ended Dec. 31, 2022, increased
compared to 2021, primarily due to:
• Higher production due to the fleet being available during
periods of supply tightness and peak pricing and
• Higher production due to higher availability and dispatch
optimization of the Alberta assets,
• Higher power price hedges, partially offsetting the impact
of lower Alberta spot prices, partially offset by
• Higher
realized energy prices
through dispatch
optimization of our Alberta assets, net of hedging and
• Lower thermal revenues due to lower steam revenue
• Higher Ontario merchant pricing and steam generation.
pricing at the Sarnia facility compared to 2022.
Adjusted EBITDA for the year ended Dec. 31, 2023,
increased compared to 2022, primarily due to:
• Lower natural gas commodity costs for the Alberta gas
assets and
• Higher revenues explained above, partially offset by
• Higher carbon costs and fuel usage related to production
with the utilization of emission credits to settle a portion
of the GHG obligation in 2022 and
• Carbon price increases from $50 per tonne to $65
per tonne, impacting our Canadian gas assets.
The Gas
expectations for the segment.
fleet significantly exceeded management's
M20
TransAlta Corporation 2023 Integrated Report
Adjusted EBITDA for the year ended Dec. 31, 2022,
increased compared to 2021, primarily due to:
• Higher revenues explained above and
• Lower carbon compliance costs due to reductions in GHG
emissions as a result of operating exclusively on natural
gas in Alberta rather than coal, and the utilization of
compliance credits to settle a portion of the GHG
obligation, partially offset by
• Increased natural gas consumption on recently converted
units and higher natural gas prices,
• Carbon price increases from $35 per tonne to $50
per tonne and
• Higher OM&A due to the Company's performance-
increased general
incentive accruals and
related
operating expenses.
Energy Transition
Year ended Dec. 31
Gross installed capacity (MW)(1)
Availability (%)
Adjusted availability (%)(2)
Production
Contract sales volume (GWh)
Merchant sales volume (GWh)
Purchased power (GWh)(3)
Total production (GWh)
Revenues(4)
Fuel and purchased power
Carbon compliance
Gross margin(5)
OM&A
Taxes, other than income taxes
Adjusted EBITDA(5)
Supplemental information:
Highvale mine reclamation spend
Centralia mine reclamation spend
2023
671
79.8
79.8
2022
671
77.2
79.0
3,329
4,417
3,329
3,951
(3,602)
(3,706)
4,144
3,574
746
557
—
189
64
3
122
15
13
724
566
(1)
159
69
4
86
12
16
Change
2021
Change
—
2.6
0.8
—
466
104
570
22
(9)
1
30
(5)
(1)
36
3
(3)
— %
1,472
(801)
(54) %
3 %
1 %
75.3
78.8
1.9
0.2
3 %
— %
— %
3,329
—
— %
12 %
6,052
(2,101)
(35) %
(3) %
(3,675)
(31)
1 %
16 %
5,706
(2,132)
(37) %
3 %
(2) %
(100) %
19 %
(7) %
(25) %
42 %
25 %
(19) %
728
432
60
236
97
6
(4)
134
(1) %
31 %
(61)
(102) %
(77)
(33) %
(28)
(29) %
(2)
(33) %
133
(47)
(35) %
6
9
6
7
100 %
78 %
(1) The gross installed capacity for 2023 and 2022, excludes Keephills Unit 1 (395 MW retired on Dec. 31, 2021) and Sundance Unit 4 (406 MW retired on
March 31, 2022).
(2) Adjusted for dispatch optimization.
(3) All of the power produced by Centralia is sold by the Energy Marketing segment for physical market delivery, which is shown as merchant sales
volumes. Power required to fulfil contractual obligations is included in purchased power. Total production from the facility includes the net result of
merchant sales volumes and purchased power.
(4) For details of the adjustments to revenues included in adjusted EBITDA refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
(5) Adjusted EBITDA and gross margin are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A.
2023
Revenues for the year ended Dec. 31, 2023, increased
compared to 2022, primarily due to:
• Higher production from higher availability due to lower
planned and unplanned outages at Centralia Unit 2 and
• Less economic dispatch leading to higher merchant sales
volumes, partially offset by
• Lower market prices.
Adjusted EBITDA for the year ended Dec. 31, 2023,
increased compared to 2022, primarily due to:
• Higher revenues as explained by the factors above,
• Lower purchased power costs due to lower pricing and
increased volumes of production and
• Lower OM&A expenses due to the retirement of
Sundance Unit 4 in the first quarter of 2022.
Mine reclamation spend for the year ended Dec. 31, 2023,
was consistent compared to 2022.
2022
Revenues for the year ended Dec. 31, 2022, decreased
compared to 2021, primarily due to:
• Lower production due to the retirements of the Keephills
Unit 1 and Sundance Unit 4, partially offset by
• Increased production from higher availability at Centralia
Unit 2 from lower planned and unplanned outages and
• Higher merchant and contract prices at Centralia.
Adjusted EBITDA for the year ended Dec. 31, 2022,
decreased compared to 2021 primarily due to:
• Lower revenues as explained by the factors above and
• Higher purchased power costs during outages at
Centralia, partially offset by
TransAlta Corporation 2023 Integrated Report
M21
• Lower OM&A as a result of lower operating costs relating
to retirements on the coal fleet in 2021 and
• Lower carbon costs in Alberta related to the retirements
on the coal fleet, thereby reducing emissions generated.
Mine reclamation spend for the Highvale and Centralia
mines increased compared to 2021, primarily due to the
advancement of reclamation activities.
Energy Marketing
Year ended Dec. 31
Revenues(1)
OM&A
Adjusted EBITDA(2)
2023
2022
Change
2021
Change
152
43
109
218
35
183
(66)
(30) %
202
8
23 %
36
(74)
(40) %
166
16
(1)
17
8 %
(3) %
10 %
(1) For details of the adjustments to revenues included in adjusted EBITDA, refer to the Additional IFRS Measures and Non-IFRS Measures section of this
MD&A. Adjusted EBITDA is not defined and has no standardized meaning under IFRS.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
2023
2022
Adjusted EBITDA for the year ended Dec. 31, 2023,
decreased compared to 2022. This was in line with
management's expectations, but lower year over year,
primarily due to:
• Lower realized settled trades during the year on market
positions in comparison to the prior year and
• OM&A increased mainly due to higher incentives related
to revenues before adjustments.
Adjusted EBITDA for the year ended Dec. 31, 2022,
increased compared to 2021, primarily due to:
• Higher realized settled trades during the year on market
positions in comparison to prior year and
• The Company capitalizing on short-term volatility in the
trading markets without materially changing the risk
profile of the business unit.
The Company was able to capitalize on volatility in the
trading of both physical and financial power and gas
products across North American deregulated markets
while maintaining
of
the business unit.
overall
profile
risk
the
Corporate
Year ended Dec. 31
OM&A
Taxes, other than income taxes
Adjusted EBITDA(1)
2023
2022
Change
2021
Change
115
1
101
1
14
—
14%
—%
84
1
17
—
20%
—%
(116)
(102)
(14)
14%
(85)
(17)
20%
(1) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
2023
2022
Adjusted EBITDA for the year ended Dec. 31, 2023,
decreased compared to 2022, primarily due to:
Adjusted EBITDA for the year ended Dec. 31, 2022,
decreased compared to 2021, primarily due to:
• Increased
spending
to
support
strategic
and
• Higher
incentive
accruals
reflecting
the
growth initiatives,
Company's performance;
• Higher costs associated with the relocation of the
• No additional receipts of Canada Emergency Wage
Company's head office and
Subsidy proceeds as occurred in 2021 and
• Increased costs due to inflationary pressures.
• Higher losses on the total return swap.
M22
TransAlta Corporation 2023 Integrated Report
Performance by Segment with Supplemental
Geographical Information
The following table provides adjusted EBITDA performance of our facilities across the regions we operate in:
Year ended Dec. 31, 2023
Hydro
Alberta
Canada, excluding Alberta
US
Australia
Adjusted EBITDA(1)
Earnings before income taxes
Alberta
Canada, excluding Alberta
US
Australia
Adjusted EBITDA(1)
Earnings before income taxes
Year ended Dec. 31, 2022
Hydro
Wind &
Solar
77
95
84
1
Gas
571
89
10
131
451
8
—
—
459
257
801
Energy
Transition
Energy
Marketing Corporate
Total
(10)
—
132
—
122
109
(116)
1,082
—
—
—
—
—
—
192
226
132
109
(116)
1,632
880
Wind &
Solar
114
106
91
—
515
12
—
—
527
311
Gas
404
87
8
130
629
Energy
Transition
Energy
Marketing Corporate
Total
(18)
—
104
—
86
183
(102)
1,096
—
—
—
—
—
—
205
203
130
183
(102)
1,634
353
(1) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Presenting this from period to period provides management and investors
with the ability to evaluate earnings (loss) trends more readily in comparison with prior periods’ results. Refer to the Segmented Financial Performance
and Operating Results section of this MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in
accordance with IFRS. Also, refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
Optimization of the Alberta Portfolio
Our merchant exposure is primarily in Alberta, where
53 per cent of our capacity is located, and 75 per cent of
our Alberta assets are available to participate in the
merchant market. Our portfolio of merchant assets in
Alberta consists of hydro facilities, wind facilities, a battery
storage facility and natural gas generation facilities.
Generating capacity in Alberta is subject to market forces,
rather than rate regulation. Power from commercial
is cleared through a wholesale electricity
generation
market. Power
in accordance with an
economic merit order administered by the AESO, based
upon offers by generators to sell power in the real-time
energy-only market. Our merchant Alberta fleet operates
under this framework and we internally manage our offers
to sell power.
is dispatched
in the Alberta
Optimization of portfolio performance
merchant market is driven by the diversity of fuel types
and enables portfolio management. It also provides us with
capacity that can be monetized as ancillary services or
dispatched into the energy market during times of supply
tightness. A significant portion of the thermal generation
capacity in the portfolio has been hedged to provide cash
flow certainty. The Company's hedging strategy includes
maintaining a significant base of commercial and industrial
customers and is supplemented with financial hedges. In
2023, 78 per cent of our energy production in Alberta was
sold under long-term contracts or fixed price hedges.
The Alberta hydro fleet provides ancillary services and grid
reliability products such as Black Start service in the event
of a system-wide blackout in the province and drought
mitigation by systematically regulating river flows. Our
Alberta wind and hydro fleets provide a steady stream of
environmental credits to meet ESG goals.
During 2023, the Company entered into a definitive share
purchase agreement relating to Heartland Generation Ltd.
and Alberta Power (2000) Ltd. (collectively "Heartland")
and expects to close the transaction in the first half of
2024, subject to certain customary closing conditions
being met. The Heartland acquisition will further expand
our portfolio capabilities. The fast-ramping nature of
certain of the Heartland units will be ideally positioned to
capture expected price swings and periodic higher realized
prices in the Alberta market.
TransAlta Corporation 2023 Integrated Report
M23
Year ended
Dec. 31
Hydro
Wind &
Solar
Energy
Transition
Gas
Total Hydro
Wind &
Solar
Energy
Transition
Gas
Total Hydro
Wind &
Solar
Energy
Transition
Gas
Total
2023
2022
2021
Gross
installed
capacity
(MW)
Total
production
(GWh)
Contract
production
(GWh)
Merchant
production
(GWh)
Hedged
production
(GWh)
Production
contracted
or hedged
(%)
Revenues(1)
($)
Fuel and
purchased
power ($)
Carbon
compliance
($)
Gross
margin ($)
834
766
1,960
—
3,560
834
636
1,960
—
3,430
834
636
1,960
801
4,231
1,492
1,907
8,360
—
11,759
1,665
1,686
8,106
19
11,476
1,586
1,319
7,281
2,591
12,777
—
774
861
—
1,635
—
620
526
—
1,146
—
271
509
—
780
1,492
1,133
7,499
—
10,124
1,665
1,066
7,580
19
10,330 1,586
1,048
6,772
2,591
11,997
378
—
7,172
—
7,550
—
—
7,228
—
7,228
—
—
6,992
—
6,992
25%
41%
96%
—%
78%
—%
37%
96%
—%
73%
—%
21%
103%
—%
61%
509
130
1,083
5
1,727
583
155
989
6
1,733
358
97
674
257
1,386
17
20
336
—
373
18
21
442
5
486
13
9
258
92
372
—
—
106
—
106
—
1
70
(1)
70
—
—
96
60
156
492
110
641
5
1,248
565
133
477
2
1,177
345
88
320
105
858
(1) Revenues have been adjusted to exclude the impact of unrealized mark-to-market gains or losses and to include realized gains and losses on closed
exchange positions.
Total production for the year ended Dec. 31, 2023, was
11,759 GWh compared to 11,476 GWh of electricity in 2022.
The increase of 283 GWh, or 2 per cent, was primarily
due to:
Gross margin for the year ended Dec. 31, 2023, was
$1,248 million compared to $1,177 million in 2022. The
increase of $71 million, or 6 per cent, was primarily due to:
• Higher power price hedges, partially offsetting the
• The commercial operation of the Garden Plain wind
impacts of lower Alberta spot prices and
facility in the third quarter of 2023,
• Higher production from our Gas assets due to strong
market conditions in the first half of 2023, partially
offset by
• Lower water resources in the Alberta Hydro assets.
Hedged production for the year ended Dec. 31, 2023,
increased compared to 2022, primarily due to:
• The opportunity to secure additional margins with
strategic hedges for the hydro assets.
• Lower natural gas prices compared to 2022, partially
offset by
• Lower ancillary services revenues due to the AESO
procuring lower volumes given its decision to reduce the
cumulative volume of imports into Alberta.
M24
TransAlta Corporation 2023 Integrated Report
The following table provides information for the Company's Alberta electricity portfolio:
Year ended Dec. 31, 2023
Alberta Market
Spot power price average per MWh
Natural gas price (AECO) per GJ
Carbon compliance price per tonne
Alberta Portfolio Results
Realized merchant power price per MWh(1)
Hydro energy spot power price per MWh
Hydro ancillary spot price per MWh
Wind energy spot power price per MWh
Gas and Energy Transition spot power price per MWh
Hedged power price average per MWh
Hedged volume (GWh)
Fuel and purchased power per MWh(2)
Carbon compliance cost per MWh(2)
2023
2022
2021
134
2.54
65
136
175
67
73
162
111
162
5.08
50
126
197
76
90
194
86
102
3.39
40
91
122
55
63
114
72
7,550
7,228
6,992
45
13
60
9
38
16
(1) Realized merchant power price for the Alberta electricity portfolio is the average price realized as a result of the Company's merchant power sales and
portfolio optimization activities (excluding assets under long-term contract and ancillary revenues) divided by total merchant GWh produced.
(2) Fuel and purchased power per MWh and carbon compliance cost per MWh are calculated on production from carbon-emitting generation in the Gas and
Energy Transition segments, and carbon compliance cost per MWh includes emission credits used to settle a portion of GHG carbon pricing obligations.
The average spot power price per MWh for the year ended
Dec. 31, 2023 decreased from $162 per MWh in 2022 to
$134 per MWh in 2023, primarily due to:
Carbon compliance cost per MWh of production for the
year ended Dec. 31, 2023, increased by $4 per MWh,
compared to 2022, primarily due to:
• Moderate temperatures in the last six months of the year
• Carbon compliance prices increasing from $50 per tonne
compared with the prior year;
in 2022 to $65 per tonne in 2023; and
• No utilization of emission credits to settle the GHG
obligation during the year. In the prior year, the Company
used emission credits to settle a portion of the carbon
compliance obligation resulting in a lower carbon cost
per MWh.
• Higher total renewable generation in the Alberta market
from new wind and solar facilities and higher wind
resources during the fourth quarter of 2023; and
• Lower natural gas prices.
Realized merchant power price per MWh of production for
the year ended Dec. 31, 2023, increased by $10 per MWh,
compared to 2022, primarily due to:
• Optimization of our available capacity across all fuel
types; and
• Higher hedge prices compared to the prior year.
Fuel and purchased power cost per MWh for the year
ended Dec. 31, 2023, decreased by $15 per MWh,
compared to 2022, primarily due to
lower natural
gas prices.
TransAlta Corporation 2023 Integrated Report
M25
Fourth Quarter Highlights
The Hydro, Wind and Gas facilities in the Alberta electricity
portfolio in the fourth quarter of 2022 had high availability
during periods of peak pricing, which resulted from
extreme cold weather and periods of province-wide
planned and unplanned outages resulting in exceptional
financial performance during the quarter. The Company did
not experience the same weather conditions in the fourth
quarter of 2023; with the weather being relatively mild
compared to the fourth quarter of 2022.
Consolidated Financial Highlights
Three months ended Dec. 31
Operational information
Adjusted availability (%)
Production (GWh)
Select financial information
Revenues
Earnings (loss) before income taxes
Adjusted EBITDA(1)
Net (loss) attributable to common shareholders
Cash flows
Cash flow from operating activities
Funds from operations(1)
Free cash flow(1)
Per share
2023
2022
86.9
5,783
89.5
6,005
624
(35)
289
854
7
541
(84)
(163)
310
229
121
351
459
315
Weighted average number of common shares outstanding
308
269
Net (loss) per share attributable to common shareholders, basic and diluted
(0.27)
(0.61)
Dividends declared per common share
Funds from operations per share(1)(2)
Free cash flow per share(1)(2)
0.12
0.74
0.39
0.11
1.71
1.17
(1) These items are not defined and have no standardized meaning under IFRS. Refer to the Segmented Financial Performance and Operating Results
section of this MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.
Also, refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
(2) FFO per share and FCF per share are calculated using the weighted average number of common shares outstanding during the period. Refer to the
Additional IFRS Measures and Non-IFRS Measures section of this MD&A for the purpose of these non-IFRS ratios.
Operating Performance
Adjusted Availability
The following table provides adjusted availability (%) by segment:
Three months ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Adjusted availability (%)
M26
TransAlta Corporation 2023 Integrated Report
2023
76.6
90.3
89.5
79.6
86.9
2022
96.8
85.7
92.8
76.4
89.5
Adjusted availability for the three months ended Dec. 31,
2023, was 86.9 per cent compared to 89.5 per cent for the
same period in 2022, primarily due to:
• Higher availability for the Wind and Solar segment, mainly
due to the partial return to service of the Kent Hills
wind facilities and
• Planned outages in the Gas segment and Hydro segment,
• Lower
unplanned
outages
in
the
Energy
partially offset by
Transition segment.
Production and Long-Term Average Generation
Three months ended Dec. 31
Actual
production
(GWh)
LTA generation
(GWh)
Production as a
% of LTA
Actual
production
(GWh)
LTA generation
(GWh)
Production as a
% of LTA
2023
2022
Hydro
Wind and Solar
Gas
Energy Transition
Total
326
1,479
2,892
1,086
5,783
447
1,621
73%
91%
435
1,499
79%
82%
344
1,222
3,375
1,064
6,005
Production for the three months ended Dec. 31, 2023, was
5,783 GWh compared to 6,005 GWh for the same period in
2022. The decrease was primarily due to:
• Lower dispatch of the Alberta Gas assets due to warmer
temperatures and
• Lower availability, partially offset by
• Higher production in the Wind and Solar segment with
the addition of the Garden Plain wind facility.
During the fourth quarter of 2023, weather impacts were
relatively mild compared to the prior period, as the
Company did not experience the same weather conditions
as the fourth quarter of 2022, which had extreme cold
weather in Alberta, resulting in periods of exceptional peak
pricing in 2022.
Financial Performance review on Consolidated Information
Three months ended Dec. 31
Revenues
Fuel and purchased power
Carbon compliance
Operations, maintenance and administration
Depreciation and amortization
Gain on sale of assets and other
Earnings (loss) before income taxes
Income tax expense
Net loss attributable to common shareholders
Net earnings attributable to non-controlling interests
2023
2022
624
278
27
150
132
—
(35)
19
(84)
5
854
446
27
157
188
46
7
89
(163)
56
(Fourth quarter
• Lower realized ancillary services prices and volumes in
Current Year Variance Analysis
2023 versus 2022)
Revenues for the three months ended Dec. 31, 2023,
decreased by $230 million, or 27 per cent, compared to
the same period in 2022, primarily due to:
• Lower merchant sales due to lower spot power prices
and production in Alberta and
the Hydro segment, partially offset by
• Higher realized and unrealized gains from hedging and
derivative positions across the segments.
Fuel and purchased power costs for the three months
ended Dec. 31, 2023, decreased by $168 million, or 38 per
cent, compared to the same period in 2022, primarily
due to:
TransAlta Corporation 2023 Integrated Report
M27
• Lower natural gas commodity costs and
• Lower consumption of natural gas within our
Gas segment.
Carbon compliance costs for the three months ended
Dec. 31, 2023, were consistent with the same period
in 2022 due to:
• Carbon price increases from $50 per tonne to $65 per
tonne, offset by
• Reduced production volumes.
OM&A expenses for the three months ended Dec. 31,
2023, decreased by $7 million, or 4 per cent, compared to
the same period in 2022, primarily due to:
• Lower incentive accruals in line with the Company's
performance in comparison to the Company's exceptional
performance in the fourth quarter of 2022, partially
offset by
• The write-down of parts and material inventory for the
gas facilities.
Depreciation and amortization for the three months
ended Dec. 31, 2023, decreased by $56 million, or 30 per
cent, compared to the same period in 2022, primarily
due to:
• Revisions to useful lives on certain facilities, partially
offset by
• Commercial operation of new facilities.
Gain on sale of assets and other for the three months
ended Dec. 31, 2023, decreased by $46 million, or 100 per
cent, compared to the same period in 2022, primarily due
to the sale of certain gas generation assets in 2022.
Loss before income taxes totalling $35 million, decreased
by $42 million, or 600 per cent, compared to earnings
before income taxes of $7 million in 2022, due to the
above noted items.
Income tax expense for the three months ended Dec. 31,
2023, decreased by $70 million, or 79 per cent, compared
to 2022, due to lower earnings before tax in 2023 and the
reduction of non-deductible expenses in the U.S.
Net loss attributable to common shareholders in the
three months ended Dec. 31, 2023 was $84 million
compared to a net loss of $163 million in the same period
of 2022, an improvement of $79 million, or 48 percent,
primarily due to the above noted items.
Net earnings attributable to non-controlling interests for
the three months ended Dec. 31, 2023, decreased by $51
million, or 91 per cent, compared to the same period in
2022, primarily due to lower net earnings for TA Cogen and
the acquisition of TransAlta Renewables on Oct. 5, 2023.
Segmented Financial Performance and Operating Results for
the Fourth Quarter
A summary of our adjusted EBITDA by segment and earnings (loss) before income taxes for the three months ended
Dec. 31, 2023, and 2022 is as follows:
Three months ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Energy Marketing
Corporate
Total adjusted EBITDA(1)
Earnings (loss) before income taxes
Adjusted EBITDA(1)
2023
2022
56
82
141
26
14
(30)
289
(35)
133
92
264
19
63
(30)
541
7
(1) This item is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
M28
TransAlta Corporation 2023 Integrated Report
The major factors impacting adjusted EBITDA for the three months ended Dec. 31, 2023, are summarized in the
following table:
Adjusted EBITDA for the three months ended Dec. 31, 2022
Hydro: lower due to decreased revenues from lower merchant and ancillary prices in the Alberta market
and lower ancillary services volumes.
Wind and Solar: lower due to lower merchant pricing in Alberta, lower wind resource in Eastern Canada
and the US and higher OM&A due to new long-term service agreements, partially offset by higher
revenues related to the partial return to service of the Kent Hills facilities and the addition of the Garden
Plain wind facility and Northern Goldfields solar facilities.
Gas: lower due to lower realized prices and production volume in the Alberta market, lower thermal
revenues due to lower steam revenue pricing at the Sarnia facility compared to 2022, and higher OM&A
with the inventory writedown at the Sundance and Keephills 2 facilities.
Energy Transition: higher due to higher production due to lower unplanned outages, partially offset by
lower revenues as a result of lower market prices.
Energy Marketing: lower realized settled trades during the fourth quarter on market positions in
comparison to the prior period in 2022.
Corporate: consistent with the same period in 2022.
Adjusted EBITDA(1) for the three months ended Dec. 31, 2023
Three months
ended Dec. 31
541
(77)
(10)
(123)
7
(49)
—
289
(1) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
FCF for the three months ended Dec. 31, 2023, decreased by $194 million or 62 per cent, compared to the same period
in 2022.
FCF for the three months ended Dec. 31, 2022
Lower adjusted EBITDA: lower FCF due to the items noted above.
Lower distributions paid to subsidiaries' non-controlling interests: lower net earnings in TA Cogen and
no dividends paid to TransAlta Renewables shareholders resulting in higher FCF.
Other(1)
FCF(2) for the three months ended Dec. 31, 2023
Three months
ended Dec. 31
315
(252)
42
16
121
(1) Refer to the Reconciliation of Cash Flow from Operations to FFO and FCF section tables in this MD&A for more details.
(2) FCF is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of this MD&A.
Selected Quarterly Information
Our results are seasonal due to the nature of the electricity
market and related fuel costs. Higher maintenance costs
are often incurred in the spring and fall when electricity
prices are expected to be lower; electricity prices generally
increase in the peak winter and summer months in our
main markets due to increased heating and cooling loads.
Margins are also typically impacted in the second quarter
due to the volume of hydro production resulting from
spring runoff and rainfall in the Pacific Northwest, which
impacts production at Centralia. Typically, hydroelectric
facilities generate most of their electricity and revenues
during the spring months when melting snow starts feeding
watersheds and
Inversely, wind speeds are
historically greater during the cold winter months and
lower in the warm summer months.
rivers.
TransAlta Corporation 2023 Integrated Report
M29
Revenues
Earnings (loss) before income taxes
Net earnings (loss) attributable to common shareholders
Net earnings (loss) per share attributable to common shareholders,
basic and diluted(1)
Cash flow from operating activities
Revenues
Earnings (loss) before income taxes
Net earnings (loss) attributable to common shareholders
Net earnings (loss) per share attributable to common shareholders,
basic and diluted(1)
Cash flow from (used in) operating activities(2)
Q1 2023
Q2 2023
Q3 2023
Q4 2023
1,089
625
1,017
383
294
1.10
462
79
62
0.23
11
453
372
1.41
681
624
(35)
(84)
(0.27)
310
Q1 2022
Q2 2022
Q3 2022
Q4 2022
735
242
186
458
(22)
(80)
0.69
(0.30)
451
(129)
929
126
61
0.23
204
854
7
(163)
(0.61)
351
(1) Basic and diluted earnings (loss) per share attributable to common shareholders is calculated in each period using the basic and diluted weighted
average common shares outstanding during the period, respectively. As a result, the sum of the earnings (loss) per share for the four quarters making up
the calendar year may sometimes differ from the annual earnings (loss) per share.
(2) The cash flow used in operating activities for the second quarter of 2022 was negative due to unfavourable changes in working capital mainly due to
movements in our collateral accounts related to higher commodity prices and volatility in the markets.
Net earnings (loss) attributable to common shareholders
over the prior eight quarters has also been impacted by the
following variations and events:
• Higher revenues arising from higher overall availability
during periods of peak pricing and higher power prices in
Alberta in the second, third and fourth quarters of 2022
and the first and second quarters of 2023;
• Lower natural gas pricing in 2023 and higher natural gas
pricing in 2022;
• Lower carbon costs in 2022 were realized as the
Company utilized emission credits to settle a portion of
our GHG obligation in the second quarter of 2022. In
2023, the Company settled its carbon obligation with
cash. Higher carbon costs in the first three quarters of
2023 were due to higher carbon price per tonne and
were also due to higher production in the second quarter
of 2023;
• The continued extended outage of the Kent Hills 1 and 2
wind facilities from the first quarter of 2022 through to
the third quarter of 2023. The facilities were partially
returned to service in the fourth quarter of 2023, with all
turbines now commissioned and the remediation project
completed in the first quarter of 2024;
• The effects of asset impairment reversals recognized in
the first, second and third quarters of 2023 and the
effects of asset impairment charges and reversals during
all periods shown;
• The effects of changes in decommissioning provisions for
retired assets from changes in estimated cash flows and
discount rates in all periods shown, and changes in useful
M30
TransAlta Corporation 2023 Integrated Report
lives, recognized in the third quarter of 2022 and the
third and fourth quarters of 2023;
• Insurance proceeds for the single tower failure at Kent
Hills wind facilities of $7 million recognized in the second
quarter of 2022;
• Liquidated damages recoverable from turbine availability
being below the contractual target at the Windrise wind
facility recorded in each quarter in 2022 and in each
quarter in 2023;
• Sundance Unit 4 being retired in the first quarter of 2022;
• Commissioning of the Garden Plain wind facility in the
third quarter of 2023 and the Northern Goldfields solar
facilities in the fourth quarter of 2023;
• Gains relating to the sale of assets being recognized in
the fourth quarter of 2022;
• Fluctuations in the Canadian dollar relative to the US
dollar resulting in foreign exchange gains and losses on
our US-denominated
long-term debt balances not
designated as hedges; and
• Fluctuations in current and deferred tax expense with
earnings before tax across the quarters. Deferred tax
expense decreased from 2022 mainly due to a lower
non-deductible tax adjustment relating to the US along
with a deferred tax recovery of a previous derecognition
of Canadian tax assets.
Strategy and Capability to Deliver Results
Our strategic focus is to invest in clean electricity solutions
that meet the needs and objectives of our customers and
communities. We invest in a disciplined and prudent
manner to deliver appropriately risk-adjusted returns to our
shareholders. To support this strategy, we maintain a
growing pipeline of project opportunities focused on hydro,
wind,
low emissions
gas generation.
solar, energy
storage and
In 2021, we set out clear targets under the Clean Electricity
Growth Plan. These targets included delivering 2 GW of
incremental renewable capacity with a target capital
investment of $3.6 billion in order to drive additional
cumulative annual EBITDA of $315 million from new growth
projects. Over the last two years, the Company achieved
over 40 per cent of that original target by adding 800 MW
of new capacity, together with the transmission expansion
project for BHP Nickel West.
In 2023, given the market challenges of rising equipment
and capital costs, we remained disciplined and patient with
our greenfield efforts and shifted our focus towards
priorities of simplification, contracted renewables and
flexible generation. We looked to two strategic acquisitions
that would position the Company well for the future,
TransAlta Renewables and Heartland Generation Ltd.
We deployed $1.3 billion toward the acquisition of
economic
TransAlta
Renewables which
provided
contribution from an incremental 1.2 GW of generating
the proportionate EBITDA and
increasing
capacity,
contractedness of the Company.
We also entered
into a definitive share purchase
agreement to acquire Heartland Generation Ltd. for an
estimated total cost of $658 million. The acquisition will
competitively position the Company in response to the
changing dynamics
the expected
significant increase in renewables and other large baseload
generation coming online in the next several years in the
highly dynamic and shifting electricity
in
the province.
in Alberta, given
landscape
In 2023, our growth and execution teams progressed
construction on new facilities, in all three of our core
geographies, through one of the largest construction
programs that the Company has ever undertaken. The fully
contracted 130 MW Garden Plain and 48 MW Northern
Goldfields solar and battery storage facilities reached
commercial operation, adding $21-$23 million
in
incremental EBITDA. The 300 MW White Rock East and the
White Rock West projects and the 200 MW Horizon Hill
wind project are expected to reach commercial operation
in the first quarter of 2024, adding $76-$82 million and
$41-$44 million, respectively, in incremental EBITDA.
Strategic Priorities and Clean Electricity Growth Plan to 2028
On Nov. 21, 2023, the Company updated its five-year
strategic growth targets and Clean Electricity Growth Plan.
The Company established six strategic priorities to focus
our path from 2024 to 2028. They are outlined below and
include goals for growth, investment and ESG priorities.
The Company's growth targets include adding up to 1.75
GW of new generating capacity to the Company’s fleet
while targeting cumulative annual EBITDA from new growth
of $350 million by investing approximately $3.5 billion to
develop, construct and acquire new assets through 2024
to the end of 2028. The growth will focus on customer-
centered renewables and storage through the execution of
its current 5.3 GW development pipeline that it plans to
expand to reach 10 GW by 2028.
We expect the Company's adjusted EBITDA generated
from renewable sources, including hydro, wind and solar
technologies, to increase to 70 per cent by the end of
2028. The Clean Electricity Growth Plan will largely be
funded from current cash balances, cash generated from
operations and debt financing.
Our investment focus to 2028 will focus on renewables
and storage, but may also include efficient and flexible
natural gas generation and new technology. The Company
has a long-term decarbonization goal of net-zero by 2045.
Our current progress towards achieving these strategic
targets is summarized below:
TransAlta Corporation 2023 Integrated Report
M31
Strategic Targets 2024 to 2028
Goals
Target
Results
Comments
Optimize Alberta
portfolio
to optimize our
Continue
existing
and
base
asset
maximize the value of our hydro
fleet in Alberta.
On
Track
The acquisition of Heartland will add 1,844 MW of
complementary flexible capacity to the Alberta portfolio
including contracted cogeneration, peaking generation,
transmission capacity and development opportunities
in hydrogen.
Execute Clean
Electricity Growth Plan
Deliver up to 1.75 GW of
renewable capacity with an
estimated capital
investment
of $3.5 billion by the end
of 2028.
Deliver
incremental average
annual EBITDA of $350 million
by the end of 2028.
the
Expand
Company's
development pipeline to 10 GW
by the end of 2028.
Selective Expansion
of Flexible Generation
and Reliability Assets
Maintain Our
Financial Strength
and Capital Allocation
Discipline
expand
Selectively
our
portfolio offerings in flexible
reliability
and
generation
assets
peaking
generation and short-term and
long-term storage.
such
as
existing
portfolio
Deliver strong cash flow from
to
our
allocate towards our funding
including growth,
priorities
dividends, debt
repayments
and share repurchases.
On
Track
On
Track
On
Track
On
Track
The Company
advanced-stage projects
decision in 2024.
is currently advancing 418 MW of
investment
towards
final
In 2024, the Company plans to make investment
decisions on new projects that will produce at least $80
million in incremental EBITDA.
In 2024, The Company plans to add an additional 1,500
MW to its development pipeline to further support our
Clean Electricity Growth Plan.
The Company plans to selectively invest in peaking
generation and battery storage assets to optimize our
portfolio. The acquisition of Heartland will add 387 MW
of peaking gas capacity to our portfolio, the peaking
assets will be optimized by the Company to address
increasing intermittency in Alberta.
On
Track
The Company had liquidity of $1.7 billion as at Dec. 31,
2023.
The Company increased the annual common share
dividend by 9 per cent to $0.24 per year effective
April 1, 2024. In 2024, the Company announced that it
intends to repurchase up to $150 million of common
shares. The increased annual common share dividend,
along with the share repurchase commitment, will
represent a return of up to approximately 40 per cent of
the midpoint of our 2024 FCF guidance to shareholders.
The Company established an Energy Innovation team to
progress our goals in this area. The team has completed
an equity investment in Ekona Power Inc. ("Ekona"), an
early-stage hydrogen production company, in order to
pursue commercialization of low cost, net-zero aligned
hydrogen. The Company also committed to invest
US$25 million over the next four years in the Energy
Impact Partners Frontier Fund, which provides a
portfolio approach to investing in emerging technologies
focused on net-zero emissions. In total, the Company
invested US$12 million to this fund as at Dec. 31, 2023.
The Company is actively engaging the Government of
Canada and Government of Alberta on the proposed
federal Clean Electricity Regulations, as well as
electricity market and renewable approval changes
under review in Alberta. This includes participation in
the AESO's Executive Working Group and the Canada
Electricity Advisory Council. TransAlta's input is focused
on how
reductions while
maintaining reliability and affordability.
to achieve emissions
The Company continues to work with the Government
of Canada on the design details of the investment tax
credits and clean technology funding provided through
the Government of Canada, as well as exploring funding
opportunities through the Government of Alberta.
Define the Next
Generation of Power
Solutions
On
Track
the needs of our
Meet
customers and communities
through the implementation of
innovative electricity solutions
and parallel investments in new
complementary sectors by the
end of 2028.
Lead in ESG and
Market Policy
Development
On
Track
to ensure
Actively participate in policy
development
the
that we provide
electricity
contributes
emissions
to
reduction, grid reliability and
competitive energy prices to
enable the successful evolution
of the markets in which we
operate and compete.
M32
TransAlta Corporation 2023 Integrated Report
Advanced-Stage Development
These projects have detailed engineering, advanced
positions
interconnection queue and/or are
in
progressing
advanced-stage development are progressing towards
the
offtake
opportunities.
Projects
in
final investment decision and do not have final approval
from the Board of Directors at time of reporting. The
following table shows the pipeline of future growth
projects currently under advanced-stage development:
Project
Tempest
SCE Capacity
Expansion
WaterCharger
Pinnacle 1 & 2
Total(3)
Type
Wind
Gas
Battery
Storage
Gas
Region
Alberta
Western
Australia
Alberta
Target
investment
date
MW Estimated spend
Average
annual
EBITDA(1)
2024
100
$260-$280
$22-$26
2024
94 AU$210-AU$230 AU$28-AU$32
2024
180
$160-$180(2)
$15-$17
Alberta
2024
44
418
$65-$75
$13-$15
$740 - $813
$82 - $94
(1) This item is not defined, has no standardized meaning under IFRS and is forward-looking. Refer to the Additional IFRS Measures and Non-IFRS Measures
section of this MD&A for further discussion.
(2) Estimated spend is net of government funding and anticipated tax credits.
(3) Total expected spending and average annual EBITDA was converted using a Canadian dollar forward exchange rate for 2023.
Early-Stage Development
These projects are in the early stages and may or may not
move ahead. Generally, these projects will have:
• Collected meteorological data;
• Begun securing land control;
• Started environmental studies;
• Confirmed appropriate access to transmission; and
• Started preliminary permitting and other regulatory
approval processes.
TransAlta Corporation 2023 Integrated Report
M33
The following table shows the pipeline of future growth projects currently under early-stage development:
Project
Canada
Riplinger Wind
Sunhills Solar
McNeil Solar
New Brunswick Battery
Tent Mountain Pumped Storage(2)
Provost
Antelope Coulee
Red Rock
Willow Creek 1
Willow Creek 2
Other Canadian Opportunities
Brazeau Pumped Hydro
Alberta Thermal Redevelopment(3)
United States
Monument Road
Swan Creek
Dos Rios
Cotton Belle 1
Cotton Belle 2
Square Top
Old Town
Canadian River
Prairie Violet
Quick Draw
Big Timber
Trapper Valley
Wild Waters
Coolspring
Other US Opportunities
Centralia Site Redevelopment(3)
Australia
Boodarie Solar
Type
Wind
Solar
Solar
Battery
Hydro
Wind
Wind
Wind
Wind
Wind
Wind
Hydro
Various
Wind
Wind
Wind
Solar
Solar
Solar
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Wind
Various
Region
Alberta
Alberta
Alberta
New Brunswick
Alberta
Alberta
Saskatchewan
Alberta
Alberta
Alberta
Various
Alberta
Alberta
Total
Nebraska
Nebraska
Oklahoma
Texas
Texas
Oklahoma
Illinois
Oklahoma
Illinois
Texas
Pennsylvania
Wyoming
Minnesota
Pennsylvania
Various
Washington
Total
Solar
Western Australia
Southern Cross Energy
Wind and Solar
Western Australia
Other Australian Opportunities
Gas, Solar, Transmission
Western Australia
Canada, United States and Australia
(1) Potential investment date is to be determined ("TBD").
Total
Total
Potential
investment
date(1)
2025
2025
2025
2025
2026
2026
2027+
2027
2027
2027
2026+
TBD
TBD
2025
2025
2025
2025
2025
2026
2026
2026
2026
2026
2026
2027
2027+
2027+
2026+
MW
300
170
57
10
160
170
200
100
70
70
190
300-900
250-500
2,047 - 2,897
152
126
242
104
81
195
185
250
130
174
50
225
40
120
144
TBD
250-500
2,468 - 2,718
2024
TBD
2024+
50
120
230
400
4,915 - 6,015
(2) This represents the Company's 50 per cent interest in Tent Mountain. See the Significant and Subsequent Events section of this MD&A for more details.
(3) The Company is currently evaluating redevelopment opportunities at these brownfield sites.
M34
TransAlta Corporation 2023 Integrated Report
Projects under Construction
The following projects have been approved by the Board of
Directors, have executed PPAs and are currently under
construction or in the process of being commissioned. The
projects under construction will be financed through
existing liquidity in the near term. We will continue to
explore permanent financing solutions on an asset-by-
asset basis.
We are continually monitoring the timing and costs on our
projects under construction. Our US projects have
relating
to complexities
increased costs
experienced schedule delays and
attributable
transmission
to
interconnections and wind turbine erection. The 300 MW
White Rock wind projects and the 200 MW Horizon Hill
wind project transmission lines are fully energized. The
projects are expected to achieve commercial operation in
the first quarter of 2024.
Project
Type
Region MW
United States
Total project (millions)
Estimated
spend
Spent to
date
Target
completion
date
PPA
Term(1)
Average
annual
EBITDA(2) Status
White
Rock
Horizon
Hill
Australia
Mount
Keith
132kV
Expansion
Mount Keith
West
Network
Upgrade
Wind
OK
300 US$510 — US$530
US$477
Q1 2024
—
US$53-US$57
• Long-term PPAs
executed
• Installation/assembly
complete
• Final stages of
commissioning
underway
Wind
OK
200 US$330 — US$340
US$307
Q1 2024
—
US$31-US$33
• Long-term PPA
executed
• Installation/assembly
complete
• Final stages of
commissioning
underway
Transmission
WA
n/a AU$54 — AU$57
AU$45
Q1 2024
15
AU$6 - AU$7
• Installation/assembly
Transmission
WA
n/a AU$37 — AU$40
AU$12
Q2 2025
14
AU$6 - AU$7
complete
• Final stages of
commissioning
underway
• Major equipment
orders placed
• Detailed design and
execution planning
underway
• On track to be
completed on
schedule
Total(3)
500 $1,228 — $1,274
1,360
$125 - $135
(1) The PPA term is confidential for the White Rock wind projects and Horizon Hill wind project.
(2) This item is not defined and has no standardized meaning under IFRS and is forward-looking. Refer to the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A for further discussion.
(3) Total expected spending and average annual EBITDA were converted using a Canadian dollar forward exchange rate for 2023. Spend to date was
converted using the period-end closing rate.
TransAlta Corporation 2023 Integrated Report
M35
Financial Position
The following table highlights significant changes in the Consolidated Statements of Financial Position from
Dec. 31, 2022, to Dec. 31, 2023:
Dec. 31, 2023
Dec. 31, 2022
Increase/(decrease)
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Risk management assets
Other current assets(1)
Total current assets
Non-current assets
Risk management assets
Property, plant and equipment, net
Long-term portion of finance lease receivable
Other non-current assets(2)
Total non-current assets
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities
Risk management liabilities
Income taxes payable
Credit facilities, long-term debt and lease liabilities
Other current liabilities(3)
Total current liabilities
Non-current liabilities
Credit facilities, long-term debt and lease liabilities
Risk management liabilities (long-term)
Defined benefit obligation and other long-term liabilities
Deferred income tax liabilities
Other non-current liabilities(4)
Total non-current liabilities
Total liabilities
Equity
Equity attributable to shareholders
Non-controlling interests
Total equity
Total liabilities and equity
348
807
151
274
1,580
52
5,714
171
1,142
7,079
8,659
797
314
9
532
90
1,742
2,934
274
251
386
1,408
5,253
6,995
1,537
127
1,664
8,659
1,134
1,589
709
282
3,714
161
5,556
129
1,181
7,027
10,741
1,346
1,129
73
178
162
2,888
3,475
333
294
352
1,410
5,864
8,752
1,110
879
1,989
10,741
(786)
(782)
(558)
(8)
(2,134)
(109)
158
42
(39)
52
(2,082)
(549)
(815)
(64)
354
(72)
(1,146)
(541)
(59)
(43)
34
(2)
(611)
(1,757)
427
(752)
(325)
(2,082)
(1)
Includes restricted cash, prepaid expenses and other, and inventory.
(2)
Includes investments, right-of-use assets, intangible assets, goodwill, deferred income tax assets and other assets.
(3)
Includes bank overdraft, current portion of decommissioning and other provisions, current portion of contract liabilities and dividends payable.
(4)
Includes exchangeable securities, long-term decommissioning and other provisions and contract liabilities.
(5) Significant changes in TransAlta's Consolidated Statements of Financial Position were as follows:
M36
TransAlta Corporation 2023 Integrated Report
Working Capital
The deficit of current assets over current
liabilities,
including the current portion of long-term debt and lease
liabilities, was $162 million as at Dec. 31, 2023 (Dec. 31,
2022 – excess of current assets over current liabilities of
$826 million), primarily as a result of the $400 million Term
Facility being reclassified from
long-term to current
liabilities in the period as it is due to be repaid in
September 2024, along with
lower receivables and
collateral provided in the Energy Marketing segment due to
reduced volatility in the market and market prices.
Current assets decreased by $2,134 million to $1,580
million as at Dec. 31, 2023, from $3,714 million as at Dec.
31, 2022, primarily due to:
• Lower trade receivables related to collections from
higher revenues recognized in December 2022, and
lower receivables and collateral provided in the Energy
Marketing segment due to lower market prices,
• Lower cash and cash equivalents, mainly from the use of
cash to complete the acquisition of the RNW Shares and
• Lower risk management assets mainly due to lower
market prices and higher contract settlements.
Current liabilities decreased by $1,146 million from $2,888
million as at Dec. 31, 2022, to $1,742 million as at Dec. 31,
2023, mainly due to:
• Lower risk management liabilities due to lower market
prices, as well as higher contract settlements during
the year,
• Lower accounts payable and accrued liabilities including
returning collateral received in the Energy Marketing
segment due to lower market prices and
• Lower income taxes payable, partially offset by
• Higher debt classified as current as the $400 million
Term Facility matures in the third quarter of 2024.
Non-Current Assets
• Higher property, plant and equipment ("PP&E") resulting
from higher capital additions of $875 million, mainly
related to the construction of growth projects and the
rehabilitation of the Kent Hills wind facilities of $157
million, inclusive of insurance proceeds. The increase in
PP&E additions was partially offset by depreciation of
$585 million and
• Higher net investment in finance leases related to the
Northern Goldfields solar facilities, partially offset by
• Lower risk management assets due to changes in market
pricing across multiple markets and contract settlements.
Non-Current Liabilities
Non-current liabilities as at Dec. 31, 2023, were $5,253
million, a decrease of $611 million from $5,864 million as at
Dec. 31, 2022, mainly due to:
• Lower long-term debt and lease liabilities related to
scheduled debt repayments and the reclassification of
the $400 million Term Facility to current liabilities,
• Lower risk management liabilities of $59 million related to
contract settlements and pricing and
• Lower defined benefit obligations due to higher interest
rates and a voluntary pension payment made to reduce
our pension obligations, partially offset by
• Higher deferred tax liabilities.
Total Equity
As at Dec. 31, 2023, the decrease in total equity of $325
million was due to:
• A net decrease of $809 million from the acquisition of
TransAlta Renewables,
• Distributions to non-controlling interests of $198 million,
• Share repurchases under the NCIB of $87 million and
• Dividends declared on common and preferred shares of
$116 million, partially offset by
• Net earnings of $796 million and
Non-current assets as at Dec. 31, 2023, were $7,079
million, an increase of $52 million from $7,027 million as at
Dec. 31, 2022, primarily due to:
• Net gains on derivatives from cash flow hedges of $99
million.
Financial Capital
The Company is focused on maintaining a strong balance
sheet and financial position to ensure access to sufficient
financial capital. Credit ratings provide information relating
to the Company's financing costs, liquidity and operations,
and affect the Company's ability to obtain short-term and
long-term financing and/or the cost of such financing.
Maintaining a strong balance sheet also allows the
into contracts with a variety of
Company to enter
counterparties on terms and prices that are favourable to
the Company’s financial results and provide TransAlta with
better access to capital markets through commodity and
credit cycles.
In 2023, Moody's reaffirmed the Company's long-term
rating of Ba1 with a stable outlook. Morningstar DBRS
reaffirmed the Company's issuer rating and unsecured
debt/medium-term notes rating of BBB (low) and the
Company's preferred shares rating of Pfd-3 (low), all with
stable outlook. In addition, S&P Global Ratings reaffirmed
the Company's senior unsecured debt rating and issuer
TransAlta Corporation 2023 Integrated Report
M37
credit rating of BB+ with a stable outlook. Risks associated
with our credit ratings are discussed in the Governance
and Risk Management section of this MD&A.
Capital Structure
Our capital structure consists of the following components as shown below:
2023
2022
2021
$
%
$
%
$
%
Net senior unsecured debt
Recourse debt - CAD debentures
Recourse debt - US senior notes
Credit facilities
Other
Less: cash and cash equivalents(1)
Less: other cash and liquid assets(2)
Net senior unsecured debt
Other debt liabilities
Exchangeable debentures
Non-recourse debt
TAPC Holdings LP bond
Pingston bond
Melancthon Wolfe Wind bond
New Richmond Wind bond
Kent Hills Wind bond
Windrise Wind bond
South Hedland non-recourse debt
OCP Bond
US tax equity financing
Lease liabilities
Total consolidated net debt(3)(4)(5)
Exchangeable preferred securities(5)
Equity attributable to shareholders
Common shares
Preferred shares
5
17
7
—
251
934
428
1
5
251
18
888
9
—
—
4
4
16
—
—
(6)
(1,118)
(21)
(947)
(17)
(20)
476
—
11
(19)
177
—
3
251
911
397
—
(345)
(12)
1,202
344
85
39
168
103
193
164
691
217
104
143
—
23
6
1
1
3
2
3
3
13
4
1
3
339
6
335
94
45
202
112
206
170
711
241
123
135
2
1
4
2
4
3
14
4
2
2
102
45
235
120
221
171
732
263
135
100
6
2
1
4
2
4
3
13
5
2
2
47
7
51
17
3,453
63
2,854
55 2,636
400
7
400
7
400
3,285
60
2,863
54 2,901
942
17
942
18
942
Contributed surplus, deficit and accumulated other comprehensive loss
(2,690)
(49)
(2,695)
(51)
(2,261)
(40)
Non-controlling interests
Total capital
127
2
879
17
1,011
5,517
100
5,243
100 5,629
18
100
(1) Cash and cash equivalents is net of bank overdraft.
(2)
Includes principal portion of the TransAlta OCP restricted cash related to the TransAlta OCP bonds as this cash is restricted specifically to repay
outstanding debt and also includes the fair value of economic and designated hedging instruments on debt, as the carrying value of the related debt is
impacted by changes in foreign exchange rates.
(3) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A for further discussion, including reconciliations to measures calculated in accordance with IFRS.
(4) The tax equity financing for the Skookumchuck wind facility, an equity-accounted joint venture, is not represented in these amounts.
(5) The total consolidated net debt excludes the exchangeable preferred securities as they are considered equity with dividend payments for
credit purposes.
M38
TransAlta Corporation 2023 Integrated Report
We have enhanced liquidity and shareholder value through
the following:
• Repaid the US$400 million 4.50 per cent unsecured
senior notes due 2022;
2023
• Extended the committed syndicated credit facility by one
year to June 30, 2027 and the committed bilateral credit
facilities by one year to June 30, 2025;
• Refinanced the $45 million Pingston non-recourse bond
due in 2023 with a non-recourse bond for approximately
$39 million, with a fixed interest rate of 6.145 per cent
per annum, payable semi-annually, and maturing on
May 8, 2043; and
• Purchased and cancelled 7,537,500 common shares at
an average price of $11.49 per share through our NCIB
program, for a total cost of $87 million.
2022
• Issued US$400 million Senior Green Bonds, with a fixed
coupon rate of 7.75 per cent per annum (effective
interest rate of 5.98 per cent), due on Nov. 15, 2029;
• Extended the committed syndicated credit facilities by
one year to June 30, 2026 and the committed bilateral
credit facilities by one year to June 30, 2024;
• Closed a two-year floating rate Term Facility with our
banking syndicate for $400 million with a maturity date of
Sept. 7, 2024. The Term Facility has interest rates that
vary depending on the option selected (e.g. Canadian
prime and bankers' acceptances); and
• Purchased and cancelled 4,342,300 common shares at
an average price of $12.48 per share through our NCIB
program, for a total cost of $54 million.
2021
• Obtained $173 million in project financing related to our
Windrise wind facility.
Credit Facilities
The Company's credit facilities are summarized in the table below:
As at Dec. 31, 2023
Credit facilities
Committed
TransAlta syndicated credit facility
TransAlta bilateral credit facilities
TransAlta Term Facility
Total committed
Non-committed
TransAlta demand facilities
Total non-committed
Utilized
Facility
size
Outstanding
letters of
credit(1)
Cash
drawings
Available
capacity
Maturity
date
1,950
240
400
417
178
—
—
1,533
Q2 2027
—
62
Q2 2025
400
—
Q3 2024
2,590
595
400
1,595
400
400
187
187
—
—
213
213
N/A
(1) TransAlta has obligations to issue letters of credit and cash collateral to secure potential liabilities to certain parties, including those related to potential
environmental obligations, commodity risk management and hedging activities, pension plan obligations, construction projects and purchase obligations.
Letters of credit drawn against the non-committed facilities reduce available capacity under the committed syndicated credit facilities.
On Oct. 5, 2023, upon closing the TransAlta Renewables
transaction, the syndicated credit facilities were amended
to effectively consolidate the TransAlta Renewables
syndicated credit facility and non-committed demand
facility
into the TransAlta credit facilities. The cash
drawings on the TransAlta Renewables' syndicated credit
facility were repaid and the outstanding letters of credit
were transferred to the TransAlta non-committed demand
facility. The TransAlta Renewables credit facilities were
then terminated.
This resulted in the TransAlta syndicated credit facility
increasing by $700 million to approximately $2.0 billion.
See the Significant and Subsequent events section of this
MD&A for more details.
TransAlta Corporation 2023 Integrated Report
M39
US Tax Equity Financing and Production
Tax Credits
In order to monetize tax
The Company owns equity interests in wind facilities that
are eligible for tax incentives available for renewable
energy facilities in the US. Current US tax law allows
qualified wind energy projects to receive production tax
credits ("PTCs") that are earned for each MWh of
generation during the first 10 years of the project's
operation.
incentives, the
Company has partnered with Tax Equity Investors (“TEI”)
who invest in these facilities in exchange for a share of the
tax incentives and cash. TransAlta accounts for the TEI
interest as long-term debt, where cash distributions and
allocations of tax incentives to the TEI primarily reduce the
long-term debt balance. Upon the TEI achieving an
agreed-upon after-tax investment return, the project Flip
Point occurs. Prior to achieving the Flip Point, the TEI are
allocated substantially all of the taxable attributes including
PTCs produced and a proportion of cash. After the Flip
Point has been reached, the Company retains substantially
all of the cash and the taxable income (losses) generated
by the facility.
In 2023, US tax laws were amended to allow entities to
monetize certain clean energy tax credits, including PTCs,
by transferring (selling) them to third-party taxpayers, in
exchange for cash consideration.
Non-Recourse Debt and Other
The Melancthon Wolfe Wind LP, TAPC Holdings LP, New
Richmond Wind LP, Kent Hills Wind LP, TEC Hedland Pty
Ltd. and Windrise Wind LP non-recourse bonds, and
TransAlta OCP LP bonds, are subject to customary
financing conditions and covenants that may restrict the
Company’s ability to access funds generated by the
facilities’ operations. Upon meeting certain distribution
tests, typically performed once per quarter, the funds are
able to be distributed by the subsidiary entities to their
respective parent entity. These conditions include meeting
a debt service coverage ratio prior to distribution, which
was met by these entities in the fourth quarter of 2023,
with the exception of Kent Hills Wind LP and TAPC
Holdings LP. Kent Hills Wind LP cannot make any
foundation
its partners until
distributions
replacement work has been completed and TAPC Holdings
LP has been impacted by higher interest rates in 2023. The
funds in these entities that have accumulated since the
fourth quarter test will remain there until the next debt
service coverage ratio is calculated in the first quarter of
2024. At Dec. 31, 2023, $79 million (Dec. 31, 2022 – $50
million) of cash was subject to these financial restrictions.
the
to
At Dec. 31, 2023, $3 million (AU$3 million) of funds held by
TEC Hedland Pty Ltd. are not able to be accessed by other
corporate entities as the funds must be solely used by the
project entities
the purpose of paying major
maintenance costs.
for
Additionally, certain non-recourse bonds require that
reserve accounts be established and funded through cash
held on deposit and/or by providing letters of credit.
Between 2024 and 2026, we have a total of $811 million of
debt repayments, including the $400 million maturity of the
Term Facility, with the balance of $411 million related to
scheduled non-recourse debt repayments. The $750
million of exchangeable securities can be exchanged at the
earliest on Jan. 1, 2025.
The following table outlines information regarding the Company's tax equity financing arrangements with PTC eligibility:
Commercial
operation date
Expected
Flip
Point
Initial TEI
investment ($)
Expected
annual PTC ($)
TEI allocation
of cash
distributions
(pre-Flip Point)
Undiscounted(1)
($)
TEI allocation
of taxable
income and
PTCs
(pre-Flip Point)
2014
2019
2029
2030
2020
2030
45
126
121
1
10
10
11
46
21
99%
99%
99%
Facility
Lakeswind
Big Level and
Antrim
Skookumchuck(2)
(1) Cumulative expected cash distributions from Dec. 31, 2023 to the expected Flip Point.
(2) The Company has a 49 per cent interest in the Skookumchuck wind facility, which is treated as an equity investment under IFRS and our proportionate
share of the net earnings is reflected as equity income on the statement of earnings under IFRS.
M40
TransAlta Corporation 2023 Integrated Report
Returns to Providers of Capital
Interest Income and Interest Expense
Interest income and the components of interest expense are shown below:
Year ended Dec. 31
Interest income
Interest on debt
Interest on exchangeable debentures
Interest on exchangeable preferred shares
Capitalized interest
Interest on lease liabilities
Credit facility fees, bank charges and other interest
Tax shield on tax equity financing
Accretion of provisions
Interest expense
2023
2022
2021
59
24
11
203
29
28
(57)
9
21
—
48
281
164
29
28
(16)
7
27
(2)
49
163
29
28
(14)
7
20
(9)
32
286
256
Interest income was higher due to higher cash balances
and favourable interest rates. Interest expense was lower
than 2022, primarily due to higher capitalized interest
resulting from higher capital expenditures on growth
projects. This was partially offset by higher interest on
debt due to higher credit facility borrowings and higher
year-over-year interest rates on variable rate debt.
Share Capital
The following tables outline the common and preferred shares issued and outstanding:
As at
Feb. 22, 2024 Dec. 31, 2023
Dec. 31, 2022
Common shares issued and outstanding, end of period
307.1
308.6
268.1
Number of shares (millions)
Preferred shares
Series A
Series B
Series C
Series D
Series E
Series G
Preferred shares issued and outstanding in equity
Series I - Exchangeable Securities(1)
Preferred shares issued and outstanding
9.6
2.4
10.0
1.0
9.0
6.6
38.6
0.4
39.0
9.6
2.4
10.0
1.0
9.0
6.6
38.6
0.4
39.0
9.6
2.4
10.0
1.0
9.0
6.6
38.6
0.4
39.0
(1) Brookfield invested $400 million in consideration for redeemable, retractable, first preferred shares. For accounting purposes, these preferred shares are
considered debt and disclosed as such in the consolidated financial statements.
Non-Controlling Interests
On Oct. 5, 2023, the Company acquired all of the
outstanding common shares of TransAlta Renewables not
already owned, directly or indirectly, by TransAlta and
certain of its affiliates. See the Significant and Subsequent
Events section of this MD&A for details.
As at Dec. 31, 2023, the Company owned 50.01 per cent of
TransAlta Cogeneration, LP (“TA Cogen”) (Dec. 31, 2022 –
50.01 per cent), which owns, operates or has an interest in
three natural-gas-fired cogeneration facilities (Ottawa,
Windsor and Fort Saskatchewan) and a natural-gas-fired
facility (Sheerness). As at Dec. 31, 2023, the Company
TransAlta Corporation 2023 Integrated Report
M41
owned 83 per cent of Kent Hills Wind LP (Dec. 31, 2022 -
83 per cent), which owns and operates three wind
facilities. Throughout 2022, on Dec. 31, 2022, and from
Jan. 1, 2023 to Oct. 4, 2023, the Company owned 60.1 per
cent of TransAlta Renewables.
Since the Company owned a controlling interest in TA
Cogen and Kent Hills Wind LP, we consolidated the entire
the
earnings, assets and
subsidiaries. Earnings, assets and
liabilities of these
subsidiaries, and of TransAlta Renewables prior to Oct. 5,
2023, were allocated to the other owners in proportion to
their ownership interests.
liabilities
relation
to
in
The reported net earnings attributable to non-controlling
interests for the year ended Dec. 31, 2023, decreased by
$10 million, compared to 2022, primarily as a result of
lower TA Cogen net earnings attributable to non-
controlling interests resulting from lower production and
lower merchant pricing in the Alberta market. TransAlta
Renewables net earnings attributable to non-controlling
interests increased by $1 million for the year ended Dec.
31, 2023 compared to 2022.
Cash Flows
The following highlights significant changes in the Consolidated Statements of Cash Flows for the year ended Dec. 31,
2023 and Dec. 31, 2022:
Year ended Dec. 31
Cash and cash equivalents, beginning of year
Provided by (used in):
Operating activities
Investing activities
Financing activities
Translation of foreign currency cash
Cash and cash equivalents, end of year
Cash Flow from Operating Activities
2023
1,134
1,464
(814)
(1,432)
(4)
348
2022
947
877
(741)
45
6
1,134
Increase/
(decrease)
187
587
(73)
(1,477)
(10)
(786)
Cash from operating activities for the year ended Dec. 31, 2023, increased compared with the same period in 2022,
primarily due to the following:
Cash flow from operating activities for the year ended Dec. 31, 2022
Higher gross margin: Lower natural gas costs included in fuel and purchased power, partially offset by
lower revenues net of unrealized gains and losses from risk management activities and higher carbon
compliance costs.
Higher OM&A: Increased spending on strategic and growth initiatives; higher costs associated with the
relocation of the Company's head office; and increased costs due to inflationary pressures.
Lower current income tax expense: Previously restricted non-capital loss carryforwards were utilized to
offset taxable income.
Higher interest income: Higher cash balances and favourable interest rates
Favourable change in non-cash operating working capital balances: Lower accounts receivable and
collateral provided as a result of volatility in the market and market prices, partially offset by lower
accounts payable and collateral received related to derivative instruments.
Other
Cash flow from operating activities for the year ended Dec. 31, 2023
Year ended
Dec. 31
877
127
(18)
15
35
440
(12)
1,464
M42
TransAlta Corporation 2023 Integrated Report
Cash Flow used in Investing Activities
Cash used in investing activities for the year ended Dec. 31, 2023, increased compared with the same period in 2022,
primarily due to the following:
Cash flow used in investing activities for the year ended Dec. 31, 2022
Lower additions to PP&E: Additions in 2022 were mainly for the construction of the White Rock wind
projects, Garden Plain wind facility, the Horizon Hill wind project and the Northern Goldfields solar
facilities. In 2023, most of these facilities achieved commercial operation.
Lower intangible assets: Lower additions of intangibles under development.
Lower proceeds on sale of PP&E: In 2022, the Company closed the sale of two hydro facilities and sold
equipment related to its Sundance Unit 5 energy transition assets and other equipment.
Unfavourable change in non-cash investing working capital balances: Lower capital accruals.
Other(1)
Cash flow used in investing activities for the year ended Dec. 31, 2023
Year ended
Dec. 31
(741)
43
18
(37)
(28)
(69)
(814)
(1) Other is mainly comprised of higher spend on project development costs in 2023, higher contributions to investments in 2023, lower insurance proceeds
in 2023 and lower settlements in 2023.
Cash Flow from (used in) Financing Activities
Cash used in financing activities for the year ended Dec. 31, 2023, increased compared with the same period in 2022,
primarily due to the following:
Cash flow from financing activities for the year ended Dec. 31, 2022
Lower repayment of long-term debt: In 2022, the Company repaid the US$400 million senior notes.
Higher share capital issuance: Used cash and issued shares to acquire TransAlta Renewables.
Lower net increase in borrowings under credit facilities: In 2022, the Company fully utilized the $400
million Term Facility, which continues to remain outstanding.
Lower issuance of long-term debt: In 2022, the Company issued US$400 million senior notes.
Lower realized gains on financial instruments: The Company recognized a gain on the repayment of
US$400 million senior notes in 2022.
Higher distributions paid to non-controlling interests: Timing of distributions to TA Cogen, partially
offset by lower distributions to TransAlta.
Higher repurchases of common shares under the NCIB.
Other
Cash flow used in financing activities for the year ended Dec. 31, 2023
Year ended
Dec. 31
45
457
(811)
(495)
(493)
(72)
(36)
(35)
8
(1,432)
TransAlta Corporation 2023 Integrated Report
M43
Other Consolidated Analysis
Unconsolidated Structured Entities
or Arrangements
Disclosure is required of all unconsolidated structured
entities or arrangements such as transactions, agreements
or contractual arrangements with unconsolidated entities,
structured finance entities, special purpose entities or
variable interest entities that are reasonably likely to
materially affect
the availability of, or
requirements for, capital resources. We currently have no
such unconsolidated structured entities or arrangements.
liquidity or
Related-Party Transactions
In the normal course of operations, we enter
into
transactions on market terms with related parties, including
consolidated and equity accounted entities, which have
been measured at exchange value and are recognized in
the consolidated financial statements, including, but not
limited to asset management fees, power purchase and
derivative contracts. Refer to Note 35, Related-Party
Transactions in the consolidated financial statements for
further details.
Commitments
Contractual commitments are as follows:
Guarantee Contracts
those
related
We have obligations to issue letters of credit and cash
collateral to secure potential liabilities to certain parties,
including
to potential environmental
obligations, commodity risk management and hedging
activities, pension plan obligations, construction projects
and purchase obligations. At Dec. 31, 2023, we provided
letters of credit totalling $782 million (2022 – $1.2 billion)
and cash collateral of $145 million (2022 – $304 million).
These letters of credit and cash collateral secure certain
amounts included on our Consolidated Statements of
Financial Position under
liabilities,
defined benefit obligations and other long-term liabilities
and decommissioning and other provisions. The decrease
in the amount of letters of credit issued during 2023
relates to lower letters of credit on physical and financial
derivative transactions in a net liability position.
risk management
Natural gas and transportation contracts(1)
Transmission(1)
Coal supply and mining agreements(1)
Long-term service agreements(1)
Operating leases(1,2)
Long-term debt(3)
Exchangeable securities(4)
Principal payments on lease liabilities(5)
Interest on long-term debt and lease liabilities(1,6)
Interest on exchangeable securities(1,4)
Growth(1,7)
2024
2025
2026
2027
2028
2029 and
thereafter
Total
55
49
50
48
57
436 695
9
86
60
3
9
71
57
3
6
—
4
—
42
44
2
2
5
—
37
2
93
126
—
157
184 424
25
37
526
142
143
153
162
2,237 3,363
—
4
—
4
—
4
—
4
—
4
750
750
123
143
186
167
158
151
143
711 1,516
53
47
53
—
53
—
53
—
53
—
13
278
—
47
Total
1,029
555
458
459
463
4,572
7,536
(1) Not recognized as a financial liability on the Consolidated Statements of Financial Position.
(2)
Includes leases that have not been recognized as a lease liability and leases that have not yet commenced.
(3) Excludes impact of hedge accounting and derivatives.
(4) Cash payment could occur after Dec. 31, 2028 if exchangeable securities are not exchanged by Brookfield Renewable Partners or its affiliates
(collectively "Brookfield"). At Brookfield's option, the exchangeable securities can be exchanged, at the earliest, on Jan. 1, 2025.
(5) Lease liabilities exclude a lease incentive of $12 million expected to be received in 2024, which is recognized in trade and other receivables.
(6)
Interest on long-term debt is based on debt currently in place with no assumption as to refinancing on maturity.
(7) For further details on growth commitments, refer to the Strategy and Capability to Deliver Results section of this MD&A.
M44
TransAlta Corporation 2023 Integrated Report
Contingencies
TransAlta is occasionally named as a party in various
claims and legal and regulatory proceedings that arise
during the normal course of its business. TransAlta reviews
each of these claims, including the nature of the claim, the
amount in dispute or claimed and the availability of
insurance coverage. There can be no assurance that any
particular claim will be resolved in the Company’s favour or
that such claims may not have a material adverse effect on
TransAlta. Inquiries from regulatory bodies may also arise
in the normal course of business, to which the Company
responds as required.
The Company conducts internal reviews of its offers and
offer behaviour in both the energy and ancillary services
markets in Alberta on an ongoing basis and will self-report
suspected contraventions or respond to inquiries from
regulatory agencies as required. There currently is no
certainty that any particular matter will be resolved in the
Company’s favour or that such matters may not have a
material adverse effect on TransAlta.
Brazeau Facility - Well Licence Applications to
Consider Hydraulic Fracturing Activities
The Alberta Energy Regulator ("AER") issued a subsurface
order on May 27, 2019, which does not permit any
hydraulic fracturing within three kilometres of the Brazeau
facility but permits hydraulic fracturing in all formations
(except the Duvernay) within three to five kilometres of the
Brazeau facility. Subsequently, two oil and gas operators
submitted applications to the AER for 10 well licences
(which include hydraulic fracturing activities) within three
to five kilometres of the Brazeau facility.
The Company's position, based on independent expert
analysis commissioned by the Government of Alberta, is
that hydraulic fracturing activities within five kilometres of
the Brazeau facility pose an unacceptable risk and that the
applications should be denied. The regulatory hearing to
consider these applications - Proceeding 379 - was
adjourned to April 2025. The other parties to the hearing,
including the Company, have supported the adjournment.
Brazeau Facility - Claim Against the
Government of Alberta
On Sept. 9, 2022, the Company filed a Statement of Claim
against the Alberta Government in the Alberta Court of
King’s Bench seeking a declaration that: (a) granting
mineral leases within five kilometres of the Brazeau facility
is a breach of the 1960 agreement between the Company
the Alberta
and
Government is required to indemnify the Company for any
costs or damages that result from the risks of hydraulic
fracturing near the Brazeau facility. On Sept. 29, 2022, the
Alberta Government filed its Statement of Defence, which
asserts, among other things, that the Company: (a) is trying
the Alberta Government; and
(b)
to usurp the jurisdiction of the AER; and (b) is out of time
under the Limitations Act (Alberta). The trial was scheduled
for two weeks starting Feb. 26, 2024. The parties to the
Inc., sought an
matter, along with Cenovus Energy
adjournment when AER Proceeding 379 was adjourned.
The trial is scheduled to resume in February 2025 in the
event the parties are unable to resolve the dispute prior to
such date.
Garden Plain
Garden Plain I LP, a wholly owned subsidiary of the
Company, retained a third-party contractor to construct
the Garden Plain wind project near Hanna, Alberta. The
contractor experienced scheduling delays, challenges with
construction and significant cost overruns, resulting in
overdue deadlines, and has asserted a claim for $49 million
in damages. The Company disputes this claim in its entirety
and asserts a counterclaim. The parties have initiated the
dispute resolution procedure, and the arbitration hearing is
set down for three weeks starting April 14, 2025.
Hydro Power Purchase Arrangement ("Hydro
PPA") Emissions Performance Credits
into
the Carbon Competitiveness
The Balancing Pool claimed entitlement to 1,750,000
Emission Performance Credits ("EPCs") earned by the
Alberta Hydro facilities as a result of TransAlta opting those
facilities
Incentive
Regulation and Technology
Innovation and Emissions
Reduction Regulation from 2018-2020 inclusive. The EPCs
under dispute had no recorded book value as they were
internally generated. The Balancing Pool claimed
ownership of the EPCs because it believed the change-in-
law provisions under the Hydro PPA required the EPCs to
be passed through to the Balancing Pool. TransAlta
disputed
reached a
this claim. The parties have
confidential settlement and this matter is now resolved.
Sundance A Decommissioning
TransAlta filed an application with the Alberta Utilities
Commission seeking payment from the Balancing Pool for
TransAlta’s decommissioning costs
for Sundance A,
including its proportionate share of the Highvale mine. The
Balancing Pool and Utilities Consumer Advocate are
participating as interveners because they take issue with
the decommissioning costs claimed by TransAlta. The
application is being heard in the first quarter of 2024 with a
decision expected to be rendered in the third quarter
of 2024.
TransAlta Corporation 2023 Integrated Report
M45
Financial Instruments
Financial instruments are used for proprietary trading
purposes and to manage our exposure to interest rates,
commodity prices and currency fluctuations, as well as
other market risks. We may currently use physical and
financial swaps, forward sale and purchase contracts,
futures contracts, foreign exchange contracts, interest rate
swaps and options to achieve our risk management
objectives. Some of our physical commodity contracts
have been entered into and are held for the purposes of
meeting our expected purchase, sale or usage
requirements and, as such, are not considered financial
instruments, and are not recognized as a financial asset or
financial liability. Other physical commodity contracts that
are not held for normal purchase or sale requirements, and
derivative financial instruments are recognized on the
Consolidated Statements of Financial Position and are
accounted for using the fair value method of accounting.
The
initial recognition of fair value and subsequent
changes in fair value can affect reported earnings in the
period the change occurs if hedge accounting is not
elected. Otherwise, changes in fair value will generally not
affect earnings until the financial instrument is settled.
Some of our financial instruments and physical commodity
contracts qualify for, and are recorded under, hedge
accounting rules. The accounting for those contracts, for
which we have elected to apply hedge accounting,
depends on the type of hedge. Our financial instruments
are mainly used for cash flow hedges or non-hedges.
These categories and
their associated accounting
treatments are explained in further detail below.
For all types of hedges, we test for effectiveness at the
end of each reporting period to determine
if the
instruments are performing as
intended and hedge
accounting can still be applied. The financial instruments
we enter into are designed to ensure that future cash
inflows and outflows are predictable.
In a hedging
relationship, the effective portion of the change in the fair
value of the hedging derivative does not impact net
earnings (loss), while any ineffective portion is recognized
in net earnings (loss).
We have certain contracts in our portfolio that, at their
inception, do not qualify for, or we have chosen not to
elect to apply, hedge accounting. For these contracts, we
recognize in net earnings (loss) mark-to-market gains and
losses resulting from changes in forward prices compared
to the price at which these contracts were transacted.
These changes in price alter the timing of earnings
recognition, but do not necessarily determine the final
settlement amount received. The fair value of future
contracts will continue to fluctuate as market prices
change. The fair value of derivatives that are not traded on
an active exchange, or extend beyond the time period for
M46
TransAlta Corporation 2023 Integrated Report
which exchange-based quotes are available, are
determined using valuation techniques or models.
Cash Flow Hedges
Cash flow hedges are categorized as project, foreign
exchange, interest rate or commodity hedges and are used
to offset foreign exchange, interest rate and commodity
price exposures resulting from market fluctuations.
Foreign currency forward contracts and cross-currency
swaps may be used to hedge foreign exchange exposures
resulting from anticipated contracts and firm commitments
denominated in foreign currencies, primarily related to
capital expenditures and currency exposures related to
US-denominated debt.
Physical and financial swaps, forward sale and purchase
contracts, futures contracts and options may be used
primarily to offset the variability in future cash flows
caused by fluctuations in electricity and natural gas prices.
Interest rate swaps may be used to convert the fixed
interest cash flows related to interest expense at debt to
floating rates and vice versa.
In a cash flow hedge, changes in the fair value of the
hedging instrument (a forward contract or financial swap,
for example) are recognized in risk management assets or
liabilities and the related gains or losses are recognized in
other comprehensive income or loss ("OCI"). These gains
or losses are subsequently reclassified from OCI to net
earnings (loss) in the same period as the hedged forecast
cash flows impact net earnings (loss) and offset the losses
or gains arising from the forecast transactions. For project
hedges, the gains and losses reclassified from OCI are
included in the carrying amount of the related PP&E.
Hedge accounting follows a principles-based approach for
qualifying hedges that is aligned with an entity's approach
to risk management. When we do not elect hedge
accounting or when the hedge is no longer effective and
does not qualify for hedge accounting, the gains or losses
as a result of changes in prices, interest or exchange rates
related to these financial instruments are recorded in net
earnings (loss) in the period in which they arise.
Net Investment Hedges
Foreign-denominated long-term debt is used to hedge
exposure to changes in the carrying values of our net
investments in foreign operations that have a functional
currency other
the Canadian dollar. Our net
investment hedges using US-denominated debt remain
effective and
these
instruments are recognized and deferred in OCI and
reclassified to net earnings on the disposal of the foreign
operation. We also manage foreign exchange risk by
in place. Gains or
losses on
than
matching foreign-denominated expenses with revenues,
such as offsetting revenues from our US operations with
interest payments on our US-dollar debt.
Non-Hedges
Financial instruments not designated as hedges are used
for proprietary trading and to reduce commodity price,
foreign exchange and interest rate risks. Changes in the
fair value of financial instruments not designated as
hedges are recognized in risk management assets or
liabilities and the related gains or losses are recognized in
the
net earnings
change occurs.
the period
in which
(loss)
in
Fair Values
The majority of fair values for our foreign exchange,
interest
rate, commodity hedges and non-hedge
derivatives are calculated using adjusted quoted prices
from an active market or inputs validated by broker quotes.
We may enter into commodity transactions involving non-
standard features for which market-observable data is not
available. These transactions are defined under IFRS as
Level III instruments. Level III instruments incorporate
inputs that are not observable from the market and fair
value is therefore determined using valuation techniques.
Fair values are validated by using reasonably possible
alternative assumptions as inputs to valuation techniques
and any material differences are disclosed in the notes to
the consolidated financial statements.
At Dec. 31, 2023, Level III instruments had a net liabilities
carrying value of $147 million (2022 – net liabilities $782
million). The Level III liabilities decreased in 2023 primarily
due to market price changes and contracts settled in the
year. Additionally, the long-term fixed price power sale
contract in the US for delivery of power was transferred to
Level II from Level III as all inputs were observable at Dec.
31, 2023. Our risk management profile has decreased in
2023 as most energy markets have moderated
considerably from the extreme price and high volatility
environment experienced for much of 2022. Our risk
management profile and practices have not changed
materially from Dec. 31, 2022.
Refer to the Material Accounting Policies and Critical
Accounting Estimates section of this MD&A for further
details regarding valuation techniques.
TransAlta Corporation 2023 Integrated Report
M47
Additional IFRS Measures and Non-IFRS Measures
An additional IFRS measure is a line item, heading or
subtotal that is relevant to an understanding of the
consolidated financial statements but is not a minimum line
item mandated under IFRS, or the presentation of a
financial measure that is relevant to an understanding of
the consolidated financial statements but is not presented
elsewhere in the consolidated financial statements. We
have
items entitled gross margin and
operating income (loss) in our Consolidated Statements of
Earnings (Loss) for the years ended Dec. 31, 2023, 2022
items provides
and 2021. Presenting
management and investors with a measurement of ongoing
operating performance that is readily comparable from
period to period.
included
these
line
line
ratios
including measures and
We use a number of financial measures to evaluate our
performance and the performance of our business
segments,
that are
presented on a non-IFRS basis, as described below. Unless
otherwise indicated, all amounts are in Canadian dollars
and have been derived from our consolidated financial
statements prepared in accordance with IFRS. We believe
that these non-IFRS amounts, measures and ratios, read
together with our IFRS amounts, provide readers with a
better
management
assesses results.
understanding
how
of
Non-IFRS amounts, measures and ratios do not have
standardized meanings under IFRS. They are unlikely to be
comparable to similar measures presented by other
companies and should not be viewed in isolation from, as
an alternative to, or more meaningful than, our IFRS results.
Non-IFRS Financial Measures
total net debt,
Adjusted EBITDA, FFO, FCF,
total
consolidated net debt and adjusted net debt are non-IFRS
measures that are presented in this MD&A. Refer to the
Segmented Financial Performance and Operating Results,
Selected Quarterly Information, Financial Capital and Key
Non-IFRS Financial Ratios sections of this MD&A for
additional information, including a reconciliation of such
non-IFRS measures to the most comparable IFRS measure.
Adjusted EBITDA
Each business segment assumes responsibility for its
operating results measured by adjusted EBITDA. Adjusted
EBITDA is an important metric for management that
represents our core operational results. Interest, taxes,
included, as
depreciation and amortization are not
differences in accounting treatments may distort our core
business results. In addition, certain reclassifications and
adjustments are made to better assess results, excluding
those items that may not be reflective of ongoing business
M48
TransAlta Corporation 2023 Integrated Report
performance. This presentation may facilitate the readers'
analysis of trends.
The following are descriptions of the adjustments made.
Adjustments to Revenue
• Certain assets that we own in Canada and in Australia are
fully contracted and recorded as finance leases under
IFRS. We believe that it is more appropriate to reflect the
payments we receive under the contracts as a capacity
payment in our revenues instead of as finance lease
income and a decrease in finance lease receivables.
• Adjusted EBITDA is adjusted to exclude the impact of
losses and
losses on
unrealized mark-to-market gains or
unrealized
commodity transactions.
foreign exchange gains or
• Adjustments are made for gains and losses related to
closed positions effectively settled by offsetting
positions with exchanges that have been recorded in the
period the positions are settled.
Adjustments to Fuel and Purchased Power
• On the commissioning of the South Hedland facility in
July 2017, we prepaid approximately $74 million of
electricity transmission and distribution costs. Interest
income is recorded on the prepaid funds. We reclassify
this interest income as a reduction in the transmission
and distribution costs expensed each period to reflect
the net cost to the business.
Adjustments to Net Other Operating Income
• Insurance recoveries related to the Kent Hills tower
collapse are not included as these relate to investing
activities
ongoing
are
business performance.
reflective
and
not
of
Adjustments to Earnings (Loss) in Addition to Interest,
Taxes, Depreciation and Amortization
• Asset impairment charges and reversals are not included
as these are accounting adjustments that
impact
depreciation and amortization and do not reflect ongoing
business performance.
• Any gains or losses on asset sales or foreign exchange
gains or losses are not included as these are not part of
operating income.
Adjustments for Equity-Accounted Investments
• During the fourth quarter of 2020, we acquired a 49 per
cent interest in the Skookumchuck wind facility, which is
treated as an equity investment under IFRS and our
proportionate share of the net earnings is reflected as
equity income on the statement of earnings under IFRS.
is part of our regular power-
As this
generating
our
proportionate share of the adjusted EBITDA of the
Skookumchuck wind facility in our total adjusted EBITDA.
operations, we
investment
included
have
In addition, in the Wind and Solar adjusted results, we
have included our proportionate share of revenues and
expenses to reflect the full operational results of this
investment. We have not included EMG International,
LLC’s adjusted EBITDA in our total adjusted EBITDA as it
does
power-
not
generating operations.
represent
regular
our
Average Annual EBITDA
Average annual EBITDA is a forward-looking non-IFRS
financial measure that is used to show the average annual
EBITDA that the project currently under construction is
expected to generate upon completion.
Funds From Operations ("FFO")
FFO is an important metric as it provides a proxy for cash
generated from operating activities before changes in
working capital and provides the ability to evaluate cash
flow trends in comparison with results from prior periods.
FFO is a non-IFRS measure.
Adjustments to Cash Flow from Operations
• FFO related to the Skookumchuck wind facility, which is
treated as an equity-accounted investment under IFRS
and equity
joint
ventures, is included in cash flow from operations under
IFRS. As this investment is part of our regular power
generating
our
proportionate share of FFO.
income, net of distributions from
operations, we
included
have
• Payments received on finance lease receivables are
reclassified to reflect cash from operations.
• We adjust for items within the Energy Transition segment
that may not be reflective of ongoing operations
including certain costs related to decisions made to
accelerate our transition off-coal in Alberta and our
planned transition off-coal for Centralia. These are
included
in the "Clean energy transition provisions
and adjustments" in the reconciliation.
• Cash received/paid on closed positions are reflected in
the period that the position is settled.
• Other adjustments
include payments/receipts
for
production tax credits, which are reductions to tax equity
debt and include distributions from equity-accounted
joint ventures.
Free Cash Flow ("FCF")
FCF is an important metric as it represents the amount of
cash that is available to invest in growth initiatives, make
scheduled principal repayments on debt, repay maturing
debt, pay common share dividends or repurchase common
shares. Changes in working capital are excluded so FFO
and FCF are not distorted by changes that we consider
temporary in nature, reflecting, among other things, the
impact of seasonal factors and timing of receipts and
payments. FCF is a non-IFRS measure.
Non-IFRS Ratios
FFO per share, FCF per share and adjusted net debt to
adjusted EBITDA are non-IFRS ratios that are presented in
the MD&A. Refer to the Reconciliation of Cash Flow from
Operations to FFO and FCF and Key Non-IFRS Financial
Ratios sections of this MD&A for additional information.
FFO per Share and FCF per Share
FFO per share and FCF per share are calculated using the
weighted average number of common shares outstanding
during the period. FFO per share and FCF per share are
non-IFRS ratios.
Supplementary Financial Measures
The Alberta electricity portfolio metrics disclosed are
supplementary financial measures used to present the
gross margin by segment for the Alberta market. Refer to
the Alberta Electricity Portfolio section of this MD&A for
additional information.
TransAlta Corporation 2023 Integrated Report
M49
Full Year Reconciliation of Non-IFRS Measures on a Consolidated Basis by Segment
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for
the year ended Dec. 31, 2023:
Hydro
Wind &
Solar(1)
Energy
Transition
Gas
Energy
Marketing Corporate
Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
533
357
1,514
751
220
1
3,376
(21)
—
3,355
(4)
16
(67)
(5)
23
—
(37)
(91)
—
(81)
Reclassifications and
adjustments:
Unrealized mark-to-market
(gain) loss
Realized gain (loss) on
closed exchange positions
Decrease in finance lease
receivable
Finance lease income
Unrealized foreign
exchange loss on
commodity
—
—
10
—
—
—
—
—
—
55
12
1
Adjusted revenues
529
373
1,525
Fuel and purchased power
19
30
453
Reclassifications and
adjustments:
Australian interest income
—
—
(4)
Adjusted fuel and purchased
power
19
30
449
Carbon compliance
—
—
112
Gross margin
OM&A
Taxes, other than income
taxes
510 343
964
48
80
192
3
12
11
Net other operating income
—
(7)
(40)
—
—
—
—
—
(21)
—
—
—
—
(21)
(3)
(1)
—
37
81
(55)
(12)
(1)
50
—
4
4
—
46
—
—
—
—
—
—
—
—
3,355
1,060
—
1,060
112
2,183
539
29
(47)
—
—
—
55
12
1
1
3,326
1
1,060
—
(4)
1
1,056
—
112
—
2,158
115
542
1
30
—
(47)
—
—
—
—
746
557
—
557
—
189
64
3
—
—
—
—
—
—
152
—
—
—
—
152
43
—
—
—
—
Reclassifications and
adjustments:
Insurance recovery
Adjusted net other operating
income
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and
amortization
Asset impairment reversals
Interest income
Interest expense
Foreign exchange loss
Gain on sale of assets
and other
Earnings before income
taxes
—
—
1
—
(6)
(40)
—
—
1
(46)
—
—
(1)
(1)
—
(47)
459
257
801
122
109
(116) 1,632
4
12
(621)
48
59
(281)
(7)
4
880
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
M50
TransAlta Corporation 2023 Integrated Report
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for
the year ended Dec. 31, 2022:
Hydro
Wind &
Solar(1)
Energy
Transition
Gas
Energy
Marketing Corporate
Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
606 303 1,209
714
160
(2) 2,990
(14)
—
2,976
Reclassifications and
adjustments:
Unrealized mark-to-
market loss
Realized gain (loss) on
closed exchange positions
Decrease in finance lease
receivable
1
104 251
10
12
— 378
—
(378)
— —
(4)
—
47
—
43
—
(43)
— — 46
—
—
—
46
—
(46)
Finance lease income
— —
19
Unrealized foreign
exchange gain
on commodity
— — —
—
—
—
(1)
—
19
—
(1)
—
—
(19)
1
—
—
—
—
—
Adjusted revenues
607 407 1,521
Fuel and purchased power
22
31 641
724
566
218
—
(2) 3,475
3 1,263
(14)
—
(485)
2,976
—
1,263
Reclassifications and
adjustments:
Australian interest income — —
(4)
—
Adjusted fuel and purchased
power
22
31 637
566
—
—
—
(4)
3 1,259
Carbon compliance
—
1 83
(1)
—
(5)
78
Gross margin
585 375 801
159
218
— 2,138
OM&A
Taxes, other than income
taxes
55
68 195
3
12
15
69
4
35
—
101 523
1
35
—
—
—
(14)
(2)
(2)
4
4
—
1,263
—
78
(489)
1,635
—
—
521
33
Net other operating income
—
(23)
(38)
—
—
—
(61)
3
—
(58)
Reclassifications and
adjustments:
Insurance recovery
—
7 —
Adjusted net other
operating income
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and
amortization
Asset impairment charges
Interest income
Interest expense
Foreign exchange gain
Gain on sale of assets
and other
Earnings before income
taxes
—
(16)
(38)
—
—
—
—
—
7
—
(54)
—
3
(7)
(7)
—
(58)
527
311 629
86
183
(102) 1,634
9
19
(599)
(9)
24
(286)
4
52
353
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
TransAlta Corporation 2023 Integrated Report
M51
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for
the year ended Dec. 31, 2021:
Hydro
Wind &
Solar(1)
Energy
Transition
Gas
Energy
Marketing Corporate
Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
383
323 1,109
709
211
4 2,739
(18)
—
2,721
Adjusted revenues
Fuel and purchased power
383
16
348 1,126
17 457
728
560
Reclassifications and
adjustments:
Unrealized mark-to-market
(gain) loss
Realized gain (loss) on
closed exchange positions
Decrease in finance
lease receivable
Finance lease income
Unrealized foreign exchange
gain on commodity
—
—
—
—
—
—
—
—
16
—
367
42
—
—
42
3
—
Reclassifications and
adjustments:
Australian interest income
Mine depreciation
Coal inventory writedown
Adjusted fuel and
purchased power
Carbon compliance
Gross margin
OM&A
Reclassifications and
adjustments:
Parts and materials
writedown
Curtailment gain
Adjusted OM&A
Taxes, other than income taxes
Net other operating income
Reclassifications and
adjustments:
Royalty onerous contract and
contract termination
penalties
Adjusted net other operating
income
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and amortization
Asset impairment charges
Interest income
Interest expense
Foreign exchange gain
Gain on sale of assets and
other
Loss before income taxes
25
(40)
19
(38)
—
(34)
—
(6)
—
29
—
23
—
41
—
25
—
(3)
—
—
—
—
(4)
—
(79)
— —
17 374
—
118
331 634
59
175
—
(111)
(17)
432
60
236
117
—
—
41
—
—
202
—
—
—
—
—
—
202
36
—
—
25
(3)
4 2,791
4 1,054
—
(4)
—
(190)
—
(17)
4 843
—
178
— 1,770
84
513
—
(2)
(26)
—
—
(28)
— —
59
173
10
13
—
(40)
6
97
6
48
—
36
—
—
—
6
84
491
1
33
—
8
—
—
—
—
—
(18)
—
—
—
—
—
—
(18)
(2)
—
—
(2)
(1)
—
34
(23)
(41)
(25)
3
(52)
—
4
190
17
211
—
—
—
—
—
2,721
1,054
—
—
—
1,054
—
178
(263)
1,489
—
511
28
(6)
22
—
—
—
—
511
32
8
—
— —
(48)
—
—
(48)
—
48
—
—
—
(40)
—
—
—
(40)
—
48
8
322
262 488
133
166
(85) 1,286
9
25
(529)
(648)
11
(256)
16
54
(380)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
M52
TransAlta Corporation 2023 Integrated Report
Full Year Reconciliation of Cash Flow from Operations to FFO and FCF
The table below reconciles our cash flow from operating activities to our FFO and FCF:
Cash flow from operating activities(1)
Change in non-cash operating working capital balances
Cash flow from operations before changes in working capital
Adjustments
Share of adjusted FFO from joint venture(1)
Decrease in finance lease receivable
Clean energy transition provisions and adjustments(2)
Realized gain (loss) on closed exchanged positions
Other(3)
FFO(4)
Deduct:
Sustaining capital(1)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(4)
Weighted average number of common shares outstanding in the period
FFO per share(4)
FCF per share(4)
2023
1,464
(124)
1,340
8
55
11
(81)
18
1,351
(174)
(3)
(51)
(223)
(10)
890
276
4.89
3.22
2022
877
316
1,193
8
46
42
37
20
2021
1,001
(174)
827
13
41
79
23
11
1,346
994
(142)
(4)
(43)
(187)
(9)
961
271
4.97
3.55
(199)
(4)
(39)
(159)
(8)
585
271
3.67
2.16
(1)
Includes our share of amounts for the Skookumchuck wind facility, an equity-accounted joint venture.
(2) 2023 includes amounts related to onerous contracts recognized in 2021 and a voluntary contribution to the US Defined Benefit Pension Plan for the
Centralia thermal facility. During 2022, to support the employees affected by the closure of the Highvale mine and our transition off coal to cleaner
sources, the Company made a voluntary special contribution of $35 million to the Highvale mine pension plan. 2022 also includes amounts related to
onerous contracts recognized in 2021. 2021 includes a write-down on parts and material inventory and coal inventory for our coal operations and
amounts related to onerous contracts and contract termination penalties.
(3) Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from equity-accounted joint venture.
(4) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
TransAlta Corporation 2023 Integrated Report
M53
The table below provides a reconciliation of our adjusted EBITDA to our FFO and FCF:
Year ended Dec. 31
Adjusted EBITDA(1)(4)
Provisions
Net interest expense(2)
Current income tax expense
Realized foreign exchange loss
Decommissioning and restoration costs settled
Other non-cash items
FFO(3)(4)
Deduct:
Sustaining capital(4)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(4)
2023
1,632
(1)
(164)
(50)
(4)
(37)
(25)
2022
1,634
25
(200)
(65)
—
(35)
(13)
1,351
1,346
(174)
(3)
(51)
(223)
(10)
890
(142)
(4)
(43)
(187)
(9)
961
2021
1,286
(43)
(200)
(56)
(2)
(18)
27
994
(199)
(4)
(39)
(159)
(8)
585
(1) Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures section of this MD&A and reconciled to earnings (loss) before
income taxes above.
(2) Net interest expense includes interest expense for the period less interest income.
(3) These items are not defined and have no standardized meaning under IFRS. FFO and FCF are defined in the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A and reconciled to cash flow from operating activities above.
(4)
Includes our share of amounts for the Skookumchuck wind facility, an equity-accounted joint venture.
M54
TransAlta Corporation 2023 Integrated Report
Fourth Quarter Reconciliation of Non-IFRS Measures on a Consolidated Basis
by Segment
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for
the three months ended Dec. 31, 2023:
Hydro
Wind &
Solar(1)
Energy
Transition
Gas
Energy
Marketing Corporate Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
77
94
246
175
39
—
631
(7)
—
624
(19)
—
59
4
—
—
—
24
—
—
—
—
24
10
—
—
—
—
14
—
27
—
15
—
—
2
1
—
735
—
278
—
(1)
—
277
—
27
—
431
29
151
1
3
—
(13)
—
—
1
(12)
(30) 289
Reclassifications and
adjustments:
Unrealized mark-to-market
(gain) loss
(2)
20
53
Realized gain on closed
exchange positions
Decrease in finance
lease receivable
Finance lease income
Unrealized foreign
exchange gain
on commodity
Adjusted revenues
Fuel and purchased power
Reclassifications and
adjustments:
—
—
23
—
—
15
—
—
—
—
2
1
75
5
114
340
8
127
Australian interest income
—
—
(1)
Adjusted fuel and
purchased power
5
8
126
Carbon compliance
—
—
27
Gross margin
OM&A
Taxes, other than
income taxes
70
13
1
106
187
25
56
1
—
7
—
—
—
—
182
138
—
138
—
44
18
—
Net other operating income
—
(3)
(10)
—
—
—
1
—
(2)
(10)
56
82
141
—
—
26
Reclassifications and
adjustments:
Insurance recovery
Adjusted net other
operating income
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and amortization
Asset impairment reversals
Interest income
Interest expense
Foreign exchange loss
Loss before income taxes
—
—
—
—
—
(7)
—
—
—
—
(7)
(1)
—
—
—
—
(59)
(27)
(15)
(2)
(1)
(104)
—
1
1
—
(105)
—
—
—
—
—
—
—
—
624
278
—
278
27
319
150
3
(13)
(1)
(1)
—
(13)
3
2
(132)
(26)
12
(66)
(7)
(35)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
TransAlta Corporation 2023 Integrated Report
M55
The following table reflects adjusted EBITDA by segment and provides reconciliation to loss before income taxes for the
three months ended Dec. 31, 2022:
Hydro
Wind &
Solar(1)
Energy
Transition
Gas
Energy
Marketing Corporate Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
Revenues
159
98 276
281
44
— 858
(4)
—
854
Reclassifications and
adjustments:
Unrealized mark-to-market
(gain) loss
Realized gain on closed
exchange positions
Decrease in finance
lease receivable
1
23 238
(7)
12
— 267
—
(267)
—
—
—
7
—
20
— 27
—
(27)
—
—
—
12
—
—
—
12
—
(12)
—
Finance lease income
—
—
4
Unrealized foreign
exchange gain
on commodity
—
— —
—
—
Adjusted revenues
160
121 537
274
Fuel and purchased power
5
11 196
234
Reclassifications and
adjustments:
Australian interest income
—
—
(1)
—
Adjusted fuel and
purchased power
5
11 195
234
Carbon compliance
—
— 27
Gross margin
155
110 315
OM&A
Taxes, other than
income taxes
22
18 57
—
5
2
Net other operating income
—
(5)
(8)
Adjusted EBITDA(2)
133
92 264
—
40
19
2
—
19
—
(1)
75
—
—
—
—
75
12
—
—
63
—
4
—
(1)
— 1,167
— 446
—
(1)
— 445
— 27
— 695
30 158
—
9
—
—
(4)
—
—
—
—
(4)
(1)
(1)
(4)
1
—
—
(309)
854
—
446
1
1
—
446
—
(310)
—
—
27
381
157
8
—
(13)
3
—
(10)
(30) 541
Equity income
Finance lease income
Depreciation and
amortization
Asset impairment charges
Interest income
Interest expense
Foreign exchange loss
Gain on sale of assets
and other
Earnings before
income taxes
4
4
(188)
(5)
10
(77)
(13)
46
7
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
M56
TransAlta Corporation 2023 Integrated Report
Fourth Quarter Reconciliation of Cash Flow from Operations to FFO and FCF
The table below reconciles our cash flow from operating activities to our FFO and FCF:
Three months ended Dec. 31
Cash flow from operating activities(1)
Change in non-cash operating working capital balances
Cash flow from operations before changes in working capital
Adjustments
Share of adjusted FFO from joint venture(1)
Decrease in finance lease receivable
Clean energy transition provisions and adjustments(2)
Realized gain on closed exchanged positions
Other(3)
FFO(3)
Deduct:
Sustaining capital(1)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(4)
Weighted average number of common shares outstanding in the period
FFO per share(4)
FCF per share(4)
(1)
Includes our share of amounts for Skookumchuck, an equity-accounted joint venture.
2023
310
(135)
175
(2)
15
4
27
10
2022
351
64
415
1
12
7
21
3
229
459
(74)
(1)
(12)
(19)
(2)
121
308
0.74
0.39
(67)
(1)
(12)
(61)
(3)
315
269
1.71
1.17
(2)
Includes amounts related to onerous contracts recognized in 2021 and a voluntary contribution to the US Defined Benefit Pension Plan for the Centralia
thermal facility.
(3) Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from the equity-accounted joint venture.
(4) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of
this MD&A.
TransAlta Corporation 2023 Integrated Report
M57
The table below provides a reconciliation of our adjusted EBITDA to our FFO and FCF for the three months ended
Dec 31. 2023 and 2022:
Three months ended Dec. 31
Adjusted EBITDA(1)(4)
Provisions
Net interest expense(2)
Current income tax recovery (expense)
Realized foreign exchange gain (loss)
Decommissioning and restoration costs settled
Other non-cash items
FFO(3)(4)
Deduct:
Sustaining capital(4)
Productivity capital
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Principal payments on lease liabilities
FCF(4)
2023
289
(1)
(41)
5
9
(15)
(17)
229
(74)
(1)
(12)
(19)
(2)
121
2022
541
20
(49)
(29)
(18)
(12)
6
459
(67)
(1)
(12)
(61)
(3)
315
(1) Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures section of this MD&A and reconciled to earnings (loss) before
income taxes above.
(2) Net interest expense includes interest expense for the period less interest income.
(3) These items are not defined and have no standardized meaning under IFRS. FFO and FCF are defined in the Additional IFRS Measures and Non-IFRS
Measures section of this MD&A and reconciled to cash flow from operating activities above.
(4)
Includes our share of amounts for the Skookumchuck wind facility, an equity-accounted joint venture.
M58
TransAlta Corporation 2023 Integrated Report
Key Non-IFRS Financial Ratios
The methodologies and ratios used by rating agencies to
assess our credit rating are not publicly disclosed. We have
developed our own definitions of ratios and targets to help
evaluate the strength of our financial position. These
ratios are not defined and have no
metrics and
IFRS and may not be
standardized meaning under
comparable to those used by other entities or by
rating agencies.
Adjusted Net Debt to Adjusted EBITDA
Year ended Dec. 31
Period-end long-term debt(1)
Exchangeable debentures
Less: Cash and cash equivalents(2)
Add: 50 per cent of issued preferred shares and exchangeable
preferred shares(3)
Other(4)
Adjusted net debt(5)
Adjusted EBITDA(6)
Adjusted net debt to adjusted EBITDA (times)
2023
3,466
344
(345)
671
(12)
4,124
1,632
2.5
2022
3,653
339
(1,118)
671
(20)
3,525
1,634
2.2
2021
3,267
335
(947)
671
(19)
3,307
1,286
2.6
(1) Consists of current and long-term portion of debt, which includes lease liabilities and tax equity financing.
(2) Cash and cash equivalents, net of bank overdraft.
(3) Exchangeable preferred shares are considered equity with dividend payments for credit-rating purposes. For accounting purposes, they are accounted
for as debt with interest expense in the consolidated financial statements. For purposes of this ratio, we consider 50 per cent of issued preferred shares,
including these, as debt.
(4)
Includes principal portion of TransAlta OCP restricted cash ($17 million for 2023, 2022 and 2021) and fair value of hedging instruments on debt (included
in risk management assets and/or liabilities on the Consolidated Statements of Financial Position).
(5) The tax equity financing for the Skookumchuck wind facility, an equity-accounted joint venture, is not represented in this amount. Adjusted net debt is
not defined and has no standardized meaning under IFRS. Presenting this item from period to period provides management and investors with the ability
to evaluate earnings trends more readily in comparison with prior periods’ results. Refer to the Additional IFRS Measures and Non-IFRS Measures section
of this MD&A.
(6) Last 12 months.
The Company's capital is managed using a net debt
position. We use the adjusted net debt to adjusted EBITDA
ratio as a measurement of financial leverage and to assess
our ability to service debt. Our target for adjusted net debt
to adjusted EBITDA is 3.0 to 4.0 times. Our adjusted
net debt
to adjusted EBITDA ratio for Dec. 31, 2023 was higher
compared to Dec. 31, 2022, due to higher adjusted net
debt resulting from lower cash and cash equivalents due to
the acquisition of TransAlta Renewables, partially offset by
scheduled debt
lower amount
repayments and a
outstanding on the credit facility at the end of 2023.
2024 Outlook
For 2024, the Company expects adjusted EBITDA to be in
the range of $1.15 billion to $1.3 billion and FCF to be in the
range of $450 million to $600 million which is based on
the following:
• Higher contribution from the wind and solar portfolio due
to the full year impact of new asset additions of the
Garden Plain wind facility and Northern Goldfields solar
facilities, as well as the full return to service of Kent Hills
wind facilities in the first quarter of 2024;
• Contributions
from
the
addition
of Mount
Keith transmission;
• Contributions from the commercial operation of the White
Rock and Horizon Hill wind projects which are expected
in the first quarter of 2024;
• Contribution from the Heartland Generation acquisition,
which is expected to close in 2024;
• Lower contributions from the legacy merchant hydro,
wind and gas portfolio in Alberta which are expected to
step down due to lower expected average power prices
in Alberta given the baseload gas and renewables supply
additions expected in 2024;
TransAlta Corporation 2023 Integrated Report
M59
• Higher expected current income tax expense in 2024 in
the absence of growth that could defer or partially offset
the Company's tax horizon; and
• Increased net interest expense in 2024 as a result of
lower interest income earned on lower cash deposits and
lower capitalized interest on growth projects.
The following table outlines our expectations on key financial targets and related assumptions for 2024 and should be
read in conjunction with the narrative discussion that follows and the Governance and Risk Management section of
this MD&A:
Measure
Adjusted EBITDA(1)(2)
FCF(1)(2)
FCF per share
Dividend
2024 Target
Updated Target 2023
2023 Actuals
$1,150 million - $1,300 million
$1,700 million - $1,800 million
$1,632 million
$450 million - $600 million
$850 million - $950 million
$890 million
$1.47 - $1.96
$2.77 - $3.10
$3.22
$0.24 per share annualized
$0.22 per share annualized
$0.22 per share annualized
(1) These items are not defined and have no standardized meaning under IFRS. Refer to the Reconciliation of Non-IFRS Measures section of this MD&A for
further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS. See also the Additional
IFRS Measures and Non-IFRS Measures section of this MD&A.
(2) During the second quarter of 2023, the Company revised and increased our 2023 guidance for adjusted EBITDA and FCF based on the strong financial
performance attained in the first half of the year and our expectations for the balance of the year.
The Company's outlook for 2024 may be impacted by a number of factors as detailed further below.
Range of key 2024 power and gas price assumptions
Market
2024 Assumptions
Updated Target 2023
2023 Actuals
Alberta spot ($/MWh)
Mid-C spot (US$/MWh)
AECO gas price ($/GJ)
$75 to $95
US$85 to US$95
$2.50 to $3.00
$150 to $170
US$90 to US$110
$2.50
$134
US$76
$2.54
Alberta spot price sensitivity: a +/- $1 per MWh change in spot price is expected to have a +/-$5 million impact on
adjusted EBITDA for 2024.
Other assumptions relevant to the 2024 outlook
Energy Marketing gross margin
Sustaining capital
Corporate cash taxes
Cash interest
Alberta Hedging
Range of hedging assumptions
Hedged production (GWh)
Hedge price ($/MWh)
Hedged gas volumes (GJ)
Hedge gas prices ($/GJ)
M60
TransAlta Corporation 2023 Integrated Report
2024 Expectations
$110 million to $130 million
$130 million to $150 million
$95 million to $130 million
$240 million to $260 million
2024
8,152
$85
62 million
$2.76
Market Pricing
The following graphs include 2024 pricing based on a range of assumptions and is subject to change:
Annual Average Spot Electricity Prices
Annual Average Gas (AECO) Prices
For 2024, spot electricity prices in Alberta are expected to
be lower compared to 2023, driven by normalized weather
expectations and the anticipated additions of new natural
gas, and wind and solar supply. Spot electricity prices in
the Pacific Northwest are expected to be higher in 2024,
but will depend on the actual hydrology for the region
during the year.
AECO natural gas prices are expected to be comparable
to 2023.
The objective of our portfolio management strategy in
Alberta is to balance opportunity and risk and to deliver
optimization strategies that contribute to our total
Sustaining Capital Expenditures
Our estimate for total sustaining capital is as follows:
Total sustaining capital (millions)
The Company expects sustaining capital to be in the range
of $130 million to $150 million. The midpoint for the range
represents a 10 per cent decrease from the midpoint of the
2023 outlook sustaining capital range of $140 million to
$170 million, and a 20 per cent decrease from 2023
sustaining capital spend. This is driven by lower sustaining
capital expenditures
for planned major maintenance
related to the gas assets and lower costs associated with
the relocation of the Company's head office.
investment, which includes a return on invested capital. We
can be more or less hedged in a given period, and we
expect to realize our annual targets through a combination
of forward hedging and selling generation into the spot
market. The assets within the Alberta electricity portfolio
are managed as a portfolio to maximize the overall value of
generation and capacity from our hydro, wind, energy
storage and thermal facilities. Hedging is a key component
of cash flow certainty and the hedges are primarily tied to
our portfolio of gas assets and opportunistically allocated
to our portfolio of hydro
than a
single facility.
facilities
rather
Spent in 2023
Expected spend in 2024
174
130-150
Liquidity and Capital Resources
We expect to maintain adequate available liquidity under
our committed credit facilities. As at Dec. 31, 2023, we had
access to $1.7 billion in liquidity, including $345 million in
cash, net of bank overdraft; which significantly exceeds
the funds required for committed growth, sustaining capital
and productivity projects. .
TransAlta Corporation 2023 Integrated Report
M61
$134$76$85$9020232024 (Assumption)AB System Market Price (Cdn$/MWh)Mid-Columbia Price (US$/MWh)$2.54$2.7520232024 (Assumption)Natural gas price (AECO) per GJ
Material Accounting Policies and Critical Accounting Estimates
The selection and application of accounting policies is an
important process that has developed as our business
activities have evolved and as accounting rules and
guidance have changed. Accounting rules generally do not
involve a selection among alternatives, but involve the
implementation and interpretation of existing rules and the
use of judgment relative to the circumstances existing in
the business. Every effort is made to comply with all
applicable rules on or before the effective date and we
believe
implementation and consistent
application of accounting rules is critical.
the proper
However, not all situations are specifically addressed in the
accounting literature. In these cases, our best judgment is
used to adopt a policy for accounting for these situations.
We draw analogies to similar situations and the accounting
guidelines governing them, consider foreign accounting
standards and consult with our independent auditors about
the appropriate interpretation and application of these
policies. Each of the critical accounting policies involves
complex situations and a high degree of judgment either in
the application and interpretation of existing literature or in
the development of estimates that impact our consolidated
financial statements.
Our material accounting policies are described in Note 2 of
the consolidated financial statements. Each policy involves
a number of estimates and assumptions to be made about
matters that are uncertain at the time the estimate is made.
Different estimates, with respect to key variables used for
the calculations, or changes to estimates, could potentially
have a material impact on our financial position or results
of operations.
We have discussed the development and selection of
these critical accounting estimates with the Audit, Finance
and Risk Committee ("AFRC") of the Board of Directors and
our independent auditors. The AFRC has reviewed and
approved our disclosure relating to critical accounting
estimates
this MD&A. These critical accounting
estimates are described as follows:
in
Revenue Recognition
Revenue from Contracts with Customers
Identification of Performance Obligations
Where contracts contain multiple promises for goods or
services, management exercises judgment in determining
whether goods or services constitute distinct goods or
services or a series of distinct goods or services that are
substantially the same and that have the same pattern of
transfer
the customer. The determination of a
performance obligation affects whether the transaction
price is recognized at a point in time or over time.
Management considers both the mechanics of the contract
to
M62
TransAlta Corporation 2023 Integrated Report
and the economic and operating environment of the
contract in determining whether the goods or services in a
contract are distinct.
Transaction Price
In determining the transaction price and estimates of
variable consideration, management considers the past
history of customer usage and capacity requirements when
estimating the goods and services to be provided to the
customer. The Company also considers the historical
production levels and operating conditions for its variable
generating assets.
Allocation of Transaction Price to
Performance Obligations
When multiple performance obligations are present in a
contract,
to each
performance obligation in an amount that depicts the
consideration the Company expects to be entitled to in
exchange for transferring the good or service.
transaction price
is allocated
The Company’s contracts generally outline a specific
amount to be invoiced to a customer associated with each
performance obligation in the contract. Where contracts do
not specify amounts for individual performance obligations,
the Company estimates the amount of the transaction
price to allocate to individual performance obligations
based on their standalone selling price, which is primarily
estimated based on the amounts that would be charged to
customers under similar market conditions.
Satisfaction of Performance Obligations
The satisfaction of performance obligations requires
management to use judgment as to when control of the
underlying good or service transfers to the customer.
Determining when a performance obligation is satisfied
affects the timing of revenue recognition. Management
considers both customer acceptance of the good or
service and the impact of laws and regulations such as
certification requirements in determining when this transfer
occurs. Management also applies judgment in determining
whether the invoice practical expedient permits recognition
of revenue at the invoiced amount if that invoiced amount
corresponds directly with the entity's performance to date.
Revenue from Other Sources
Revenue from Derivatives
Commodity risk management activities involve the use of
derivatives such as physical and financial swaps, forward
sales contracts, futures contracts and options that are
used to earn revenues and to gain market information.
These derivatives are accounted for using fair value
accounting. The determination of the fair value of
commodity risk management contracts and derivative
instruments is complex and relies on judgments concerning
future prices, volatility and liquidity, among other factors.
Some of our derivatives are not traded on an active
exchange or extend beyond the time period for which
exchange-based quotes are available, requiring us to use
internal valuation techniques or other models such as
numerical derivative valuation or scenario analysis.
Merchant Revenue
Revenues from non-contracted capacity (i.e., merchant)
are comprised of energy payments, at market price, for
each MWh produced and are recognized upon delivery.
Financial Instruments
in an orderly
The fair value of a financial instrument is the price that
would be received to sell an asset or paid to transfer a
liability
transaction between market
participants at the measurement date. Fair values can be
determined by reference to prices for instruments in active
markets to which we have access. In the absence of an
active market, we determine fair values based on valuation
models or by reference to other similar products in
active markets.
Fair values determined using valuation models require the
use of assumptions. In determining those assumptions, we
look primarily to external readily observable market inputs.
However, if not available, we use inputs that are not based
on observable market data.
Level Determinations and Classifications
The Level I, II and III classifications in the fair value
hierarchy are utilized by the Company. The fair value
measurement of a financial instrument is included in only
one of the three levels, the determination of which is based
on the lowest level input that is significant to the derivation
of the fair value. Refer to Note 14(I) and (II) from our
consolidated financial statements for further details on the
inputs used for each level.
inputs
techniques
to valuation
instruments. Fair values are stressed
The effect of using reasonably possible alternative
assumptions as
for
contracts included in the Level III fair value measurements
at Dec. 31, 2023, is an estimated total upside of $92 million
(2022 – $193 million) and total downside of $116 million
(2022 – $287 million) impact to the carrying value of the
financial
for
unobservable inputs, which can include variable volumes,
unobservable prices and wind discounts, among other
inputs. The variable volumes are stressed up and down
based on historically available production data. Prices are
stressed for longer-term deals where there are no liquid
market quotes using various
internal and external
forecasting sources to establish a high and a low price
range. Wind discounts
to volume
relationships and are stressed specific to each location.
represent price
In addition to the Level III fair value measurements
discussed above, the Brookfield Investment Agreement
allows Brookfield the option to exchange all of the
outstanding exchangeable securities
into an equity
ownership interest of up to a maximum of 49 per cent in an
entity formed to hold TransAlta’s Alberta Hydro Assets
after Dec. 31, 2024. The fair value of the option to
exchange is considered a Level III fair value measurement,
with an estimated downside of $25 million (2022 – $25
million) potential impact to the carrying value of nil as at
Dec. 31, 2023 (2022 – nil). The sensitivity analysis has
been prepared using the Company’s assessment that a
change in the implied discount rate of the future cash flow
of one per cent is a reasonably possible change.
Valuation of PP&E and
Associated Contracts
At the end of each reporting period, we assess whether
there is any indication that PP&E and finite life intangible
assets are impaired or whether a previously recognized
impairment may no longer exist or may have decreased.
inflows that are
Our operations, the market and business environment are
routinely monitored and judgments and assessments are
made to determine whether an event has occurred that
indicates a possible impairment. If such an event has
occurred, an estimate is made of the recoverable amount
of the asset or cash-generating unit (“CGU”) to which the
asset belongs. A CGU is the smallest identifiable group of
assets that generates cash
largely
independent of the cash inflows from other assets or
groups of assets and goodwill is allocated to each CGU or
group of CGUs that is expected to benefit from the
synergies of the acquisition from which the goodwill arose.
The recoverable amount is the higher of an asset’s fair
value less costs of disposal or its value in use. Fair value is
the price that would be received to sell an asset in an
orderly transaction between market participants at the
measurement date. In determining fair value less costs of
disposal, information about third-party transactions for
similar assets is used and if none is available, other
valuation techniques, such as discounted cash flows, are
used. Value in use is computed using the present value of
management’s best estimates of future cash flows based
on the current use and present condition of the asset.
In estimating either fair value less costs of disposal or
value
in use using discounted cash flow methods,
estimates and assumptions must be made about sales
prices, cost of sales, production, fuel consumed, capital
expenditures, retirement costs and other related cash
inflows and outflows over the life of the facilities, which
can range from 30 to 49 years. In developing these
assumptions, management uses estimates of contracted
and future market prices based on expected market supply
and demand in the region in which the facility operates,
anticipated production levels, planned and unplanned
outages, changes to regulations and transmission capacity
or constraints for the remaining life of the facilities.
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Discount rates are determined by employing a weighted
average cost of capital methodology that is based on
capital structure, cost of equity and cost of debt
assumptions based on comparable companies with similar
risk characteristics and market data as the asset, CGU or
group of CGUs subject to the test. These estimates and
assumptions are susceptible to change from period to
period and actual results can and often do differ from the
estimates and can have either a positive or negative
impact on the estimate of the impairment charge and may
be material.
judgment
independent cash
The impairment outcome can also be impacted by the
determination of CGUs or groups of CGUs for asset and
goodwill impairment testing. The allocation of goodwill is
reassessed upon changes in the composition of segments,
CGUs or groups of CGUs. In respect of determining CGUs,
is required to determine what
significant
constitutes
flows between power
facilities that are connected to the same system. We
evaluate the market design, transmission constraints and
the contractual profile of each facility, as well as our
commodity price risk management plans and practices, in
order to inform this determination. With regard to the
allocation or reallocation of goodwill, significant judgment
is required to evaluate synergies and their impacts.
Minimum
to
segmentation and internal monitoring activities.
thresholds also exist with
respect
We evaluate synergies with regard to opportunities from
combined talent and technology, functional organization
and future growth potential and we consider our own
performance measurement processes
in making this
determination. No changes arose in our CGUs in 2023.
PP&E impairment charges can be reversed in future periods
if circumstances improve. No assurances can be given if
any reversal will occur or the amount or timing of any
such reversal.
Asset Impairments
Hydro
During 2023, internal valuations indicated the fair value
less costs of disposal for two hydro facilities exceeded the
carrying value due to a contract extension and changes in
impacted
power price assumptions, which favourably
estimated future cash flows and resulted
in a full
recoverability test. As a result of the recoverability test an
impairment reversal of $10 million was recognized.
Wind and Solar
During 2023, the Company recorded a net impairment
reversal of $4 million as a result of changes in power price
assumptions for two wind facilities, which favourably
impacted estimated future cash flows and resulted in a full
recoverability test.
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TransAlta Corporation 2023 Integrated Report
Valuation of Goodwill
We evaluate goodwill for impairment at least annually, or
more frequently if indicators of impairment exist. If the
carrying amount of a CGU or group of CGUs, including
goodwill, exceeds the unit’s fair value, the excess
represents a goodwill impairment loss.
For the purposes of the 2023 goodwill impairment review,
the Company determined the recoverable amounts of the
Wind and Solar segment by calculating the fair value less
costs of disposal using discounted cash flow projections. In
2023, the Company relied on the recoverable amounts
determined in 2022 for the Hydro and Energy Marketing
segments in performing the 2023 goodwill impairment
review. The recoverable amounts are based on the
Company’s long-range forecasts for the periods extending
to the last planned asset retirement in 2072. The resulting
fair value measurement is categorized within Level III of the
fair value hierarchy. We have determined there were no
goodwill impairments for 2023, 2022 and 2021.
to changes
from period
Determining the fair value of the CGUs or group of CGUs is
susceptible
to period as
management is required to make assumptions about future
cash flows, including estimates of contracted and future
market prices based on expected market supply and
demand in the region in which the facility operates,
anticipated production levels, planned and unplanned
outages, changes to regulations and transmission capacity
or constraints for the remaining life of the facilities.
Project Development Costs
Project development costs include external, direct and
incremental costs that are necessary for completing an
acquisition or construction project. The appropriateness of
capitalization of these costs is evaluated each reporting
period and amounts capitalized for projects no longer
probable of occurring are charged to net earnings (loss).
Useful Life of PP&E
item of PP&E
is
Each significant component of an
depreciated over its estimated useful life. A component is a
tangible asset that can be separately identified as an asset
and is expected to provide a benefit of greater than one
year. Estimated useful lives are determined based on
current
into
consideration the anticipated physical life of the asset,
existing long-term sales agreements and contracts, current
and forecasted demand, the potential for technological
obsolescence and regulations. The useful lives of PP&E
and depreciation rates used are reviewed at least annually
to ensure they continue to be appropriate.
facts and past experience and
take
Change in Estimate - Useful Lives
During 2023, the Company adjusted the useful lives of
certain assets in the Gas segment to reflect changes made
based on future operating expectations of the assets. This
resulted in a decrease of $92 million in depreciation
expense
the Consolidated
in
recognized
Statement of Earnings (Loss) in 2023.
that was
Leases
In determining whether the Company's contracts contain,
or are, leases, management must use judgment to assess
whether the contract provides the customer with the right
to substantially all of the economic benefits from the use of
the asset during the lease term and whether the customer
obtains the right to direct the use of the asset during the
lease term. For those agreements considered to contain, or
be, leases, further judgment is required to determine the
lease term by assessing whether termination or extension
options are reasonably certain to be exercised. Judgment
is also applied in identifying in-substance fixed payments
(included) and variable payments that are based on usage
or performance factors (excluded) and in identifying lease
and non-lease components (services that the supplier
performs) of contracts and in allocating contract payments
to lease and non-lease components.
For leases where the Company is a lessor, judgment is
required to determine if substantially all of the significant
risks and rewards of ownership are transferred to the
customer or remains with the Company, to appropriately
account for the agreement as either a finance or operating
lease. These judgments can be significant and impact how
we classify amounts related to the arrangement as either
PP&E or as a finance lease receivable on the Consolidated
Statements of Financial Position and therefore the amount
of certain items of revenue and expense are dependent
upon such classifications.
Income Taxes
Preparation of the consolidated financial statements
involves determining an estimate of, or provision for,
income taxes in each of the jurisdictions in which we
operate. The process also involves making an estimate of
taxes currently payable and income taxes expected to be
payable or recoverable in future periods, referred to as
deferred income taxes. An assessment must also be made
to determine the likelihood that our future taxable income
will be sufficient to permit the recovery of deferred income
tax assets. To the extent that such recovery is not
probable, deferred income tax assets must be reduced.
The reduction of the deferred income tax asset can be
reversed if the estimated future taxable income improves.
No assurances can be given if any reversal will occur or the
amount or timing of any such reversal. Management must
its assessment of continually
exercise
judgment
in
changing tax interpretations, regulations and legislation to
ensure deferred income tax assets and liabilities are
complete and fairly presented. Differing assessments and
applications than our estimates could materially impact the
amount recognized for deferred income tax assets and
liabilities. Our tax filings are subject to audit by taxation
authorities. The outcome of some audits may change our
tax liability, although we believe that we have adequately
provided for income taxes in accordance with IFRS based
on all information currently available. The outcome of
pending audits is not known nor is the potential impact on
the consolidated financial statements determinable.
Employee Future Benefits
We provide selected pension and other post-employment
benefits to employees, such as health and dental benefits.
The cost of providing these benefits is dependent upon
many factors,
including actual plan experience and
estimates and assumptions about future experience.
The liabilities for pension, other post-employment benefits
and associated pension costs
in annual
impacted by employee
compensation expenses are
demographics,
levels,
employment periods, the level of contributions made to the
plans and earnings on plan assets.
including age, compensation
included
Changes to the provisions of the plans may also affect
current and future pension costs. Pension costs may also
be significantly impacted by changes in key actuarial
assumptions, including, for example, the discount rates
used in determining the defined benefit obligation and the
net interest cost on the net defined benefit liability. The
discount rate used to estimate our obligation reflects high-
quality corporate fixed income securities currently available
and expected to be available during the period to maturity
of the pension benefits.
Defined Benefit Obligation
The liability for pension and post-employment benefits and
associated costs included in compensation expenses are
impacted by estimates related to changes in key actuarial
assumptions, including discount rates. The defined benefit
obligation has increased by $5 million to $155 million as at
Dec. 31, 2023, from $150 million as at Dec. 31, 2022. A one
per cent increase in discount rates would have a $40
million impact on the defined benefit obligation.
Decommissioning and
Restoration Provisions
We recognize decommissioning and restoration provisions
for generating facilities and mine sites in the period in
which they are incurred if there is a legal or constructive
obligation to remove the facilities and restore the site. The
amount recognized as a provision is the best estimate of
the expenditures required to settle the provision. Expected
TransAlta Corporation 2023 Integrated Report
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Classification of Joint Arrangements
for
the
the accounting
Upon entering into a joint arrangement, the Company must
classify it as either a joint operation or joint venture and the
joint
classification affects
arrangement. In making this classification, the Company
exercises judgment in evaluating the terms and conditions
of the arrangement to determine whether the parties have
rights to the assets and obligations or rights to the net
assets. Factors such as the legal structure, contractual
arrangements and other facts and circumstances, such as
where the purpose of the arrangement is primarily for the
provision of the output to the parties and when the parties
are substantially the only source of cash flows for the
arrangement, must be evaluated to understand the rights
of the parties to the arrangement.
Significant Influence
Upon entering into an investment, the Company must
classify it as either an investment as an associate or an
investment under IFRS 9. In making this classification, the
Company exercises judgment in evaluating whether the
Company has significant influence over the investee.
Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but
is not control or joint control over those policies. If the
Company holds 20 per cent or more of the voting rights in
the investee, it is presumed that the entity has significant
influence, unless it can be clearly demonstrated that this is
not the case. Other factors such as representation on the
board of directors, participation
in policy-making
processes, material transactions between the Company
and investee, interchange of managerial personnel or
providing essential technical information are considered
when assessing if the Company has significant influence
over an investee.
inherent
values are probability weighted to deal with the risks and
uncertainties
in the timing and amount of
settlement of many decommissioning and restoration
provisions. Expected values are discounted at the current
market-based risk-free interest rate adjusted to reflect the
market’s evaluation of our credit standing.
The Company recognizes provisions for decommissioning
Initial decommissioning provisions and
obligations.
subsequent changes thereto, are determined using the
required cash
Company’s best estimate of
expenditures, adjusted
risks and
timing and amount
uncertainties
of settlement.
inherent
reflect
the
the
the
to
in
the decommissioning and
During 2023,
restoration
provision decreased by $89 million due to revisions in
estimated cash flows and timing of cash flows for certain
Gas and Energy Transition assets. The timing of cash flows
was adjusted to optimize and maximize efficiencies by
staging required reclamation work. Operating assets
included in PP&E decreased by $34 million and $55 million
was recognized as an impairment reversal in net earnings
related to retired assets.
in
During 2023, revisions in discount rates increased the
decommissioning and restoration provision by $52 million
due to a decrease in discount rates, largely driven by
decreases
long-term market benchmark rates. On
average, discount rates decreased compared to 2022, with
rates ranging from 6.0 to 9.0 per cent as at Dec. 31, 2023.
This has resulted in a corresponding increase in PP&E of
$31 million on operating assets and the recognition of a
$21 million impairment charge in net earnings related to
retired assets.
Other Provisions
Where necessary, we recognize provisions arising from
ongoing business activities, such as interpretation and
application of contract terms, ongoing litigation and force
majeure claims. These provisions and subsequent changes
thereto, are determined using our best estimate of the
outcome of the underlying event and can also be impacted
by determinations made by third parties, in compliance
with contractual requirements. The actual amount of the
provisions that may be required could differ materially from
the amount recognized.
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TransAlta Corporation 2023 Integrated Report
Accounting Changes
Current Accounting Changes
Amendments to IAS 12 Deferred Tax Related
to Assets and Liabilities Arising from a
Single Transaction
On May 7, 2021, the International Accounting Standards
Board (“IASB”) issued Deferred Tax Related to Assets and
Liabilities Arising from a Single Transaction, which amends
IAS 12 Income Taxes. The amendments clarify that the
initial recognition exemption under IAS 12 does not apply to
transactions such as
leases and decommissioning
obligations. These transactions give rise to equal and
offsetting temporary differences in which deferred tax
should be recognized.
The amendments are effective
for annual periods
beginning on or after Jan. 1, 2023, and were adopted by
the Company on that date. The Company's accounting
aligns with the amendment and no financial impact arose
upon adoption.
Amendments to IAS 12 International Tax
Reform — Pillar Two Model Rules
that
to ensure
The Organization
for Economic Co-operation and
Development (OECD) published Pillar Two model rules in
large multinational
December 2021
companies would be subject to a minimum 15 per cent tax
rate. In May 2023, the IASB issued amendments to IAS 12
Income Taxes to provide companies with
immediate
temporary relief from accounting for deferred taxes arising
from the OECD international tax reform. The amendments
clarify that IAS 12 applies to income taxes arising from tax
law enacted or substantively enacted to implement the
Pillar Two model rules published by the OECD. Pillar Two
legislation has not been enacted or substantively enacted
in any jurisdiction in which the Company operates and
therefore has not been reflected within our tax provisions
at Dec. 31, 2023.
Future Accounting Changes
Amendments to IAS 1 Non-current Liabilities
with Covenants and Classification of Liabilities
as Current or Non-current
In October 2022, the IASB issued Non-current Liabilities
with Covenants, which amends IAS 1 Presentation of
Financial Statements, to clarify how conditions with which
an entity must comply within 12 months after the reporting
period affect the classification of a liability. In January
2020, the IASB issued Classification of Liabilities as
Current or Non-current, which amends IAS 1 Presentation
of Financial Statements regarding the classification of
clarifying
non‐current,
or
liabilities
that contractual
rights and conditions existing at
the end of the reporting period are relevant in determining
whether the Company has a right to defer settlement of a
liability by at least 12 months.
current
as
Additionally, the IASB clarified that the classification of a
liability is unaffected by the likelihood that an entity will
exercise its deferral right. The amendments are effective
for annual periods beginning on or after Jan. 1, 2024, and
are to be applied retrospectively. On Jan. 1, 2024, the
Company will re-classify the Exchangeable Securities from
non-current liabilities to current liabilities as the conversion
option can be exercised at any time after Jan. 1, 2025,
although there is no obligation to deliver cash equivalent
resources and the holder cannot call for repayment. This
accounting is consistent with the amendment.
Environmental, Social and Governance
Sustainability, or ESG management and performance, is a
priority at TransAlta. Sustainability is one of our core
values, which means it is part of our corporate culture. We
perpetually strive to further integrate sustainability into our
governance, decision-making, risk management and day-
to-day business processes, while enabling our growth
strategy. The ultimate outcome of our sustainability focus
is continuous improvement on key, material ESG issues and
ensuring our economic value creation is balanced with a
value
and
our stakeholders.
environment
proposition
the
for
Our key strategic sustainability pillars build on our
corporate strategy and weave through our business. Our
track record in these areas illustrates our commitment to
sustainability (including climate change leadership and
safety). In other areas, where we have set new goals in
recent years (including equity, diversity and inclusion), we
believe the focus will only strengthen our corporate
strategy and support value creation into the future. Our
pillars include:
• Clean, Reliable and Sustainable Electricity Production
• Safe, Healthy, Diverse and Engaged Workplace
• Positive Indigenous, Stakeholder and
Customer Relationships
• Progressive Environmental Stewardship
• Technology and Innovation
TransAlta Corporation 2023 Integrated Report
M67
In 2022, we
The disclosure of our most relevant sustainability factors
remained in 2023 and is guided by our sustainability
materiality assessment.
refreshed our
materiality assessment by evaluating key sector-specific
research on material issues, supported by internal and
external engagement on key sustainability issues. Our
Enterprise Risk Management ("ERM") program is designed
to help the Company focus its efforts on key enterprise
risks, within the planning horizon, that could significantly
impact the success of our strategy,
including our
sustainability objectives. We consider a sustainability
factor as material if it could substantively affect our ability
to create value.
In addition, we reviewed key topics identified within SASB,
TCFD, IFRS and the Taskforce on Nature-related Financial
Disclosures to inform the identification of our material
sustainability factors. We also considered sustainability
factors from the electricity sector through Electricity
Canada’s 2021 Sustainable Electricity Report and
conducted a peer review of material sustainability factors.
This work was validated by our executive team and
resulted in the identification of 21 material sustainability
factors presented in the Sustainability Governance section
of this MD&A.
For further guidance on our risk factors, refer to the
Governance and Risk Management section of this MD&A.
Reporting on Our Material
Sustainability Factors
the
TransAlta has been reporting on sustainability since 1994.
The Company's ESG reporting content is integrated within
this MD&A to provide information on how ESG affects our
business (including material focus areas) and is guided by
leading ESG reporting frameworks. We adopt guidance
from the International Sustainability Standards Board by
the International Financial Reporting Standards ("IFRS")
Foundation,
Integrated Reporting
Framework, the Global Reporting Initiative ("GRI") and the
("SASB")
Sustainability Accounting Standards Board
requirements for electric utilities and power generators. We
continue to monitor the development of sustainability and
climate-related disclosure requirements to assess our
future reporting, such as the proposed climate-related
disclosure rules by the Canadian Securities Administrators,
the US Securities and Exchange Commission and the
Australian government.
International
launched
in 2023,
Since 2007, TransAlta's material sustainability data to be
disclosed has received limited assurance from independent
third-party providers. Climate-related data to be disclosed
is informed by the IFRS S2 Climate-related Disclosures
in alignment with the
Standard
recommendations of the Task Force on Climate-related
Financial Disclosures ("TCFD"). In 2024, TransAlta will
continue to focus on our alignment with the IFRS S2
requirements. As a result, we no longer expect to respond
to climate change questionnaires from CDP (the global
disclosure system
impacts known
formerly as the Carbon Disclosure Project). We will
continue to monitor its future guidance for the purpose of
improvement of our voluntary climate-
continuous
related disclosures.
for environmental
alignment with both
In 2023, we reviewed and updated our management
response to our 2021 climate-related scenario analysis that
enhanced our
international
sustainability frameworks. We also reviewed and updated
our Climate Transition Plan and climate-related financial
metrics. GHG emissions data for scopes 1 and 2 follow the
accounting and reporting standards of the GHG Protocol.
We continue to make advancements in our scope 3
accounting for future reporting in alignment with the GHG
Protocol. For further
information on climate change
management and the findings of our scenario analysis,
refer to the Decarbonizing Our Energy Mix section of
this MD&A.
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TransAlta Corporation 2023 Integrated Report
Accelerating Our Business Transformation with a Target to
Become Net-Zero by 2045
At TransAlta, our mission is to provide safe, low-cost and
reliable clean electricity to our customers. As a customer-
centred clean electricity leader, we are well positioned to
support our customers' ESG and sustainability goals. To
achieve this goal,
in today's evolving economy and
increasingly electrified world, our strategy focuses on
renewable electricity growth and a deep commitment to
sustainability. We believe that we are uniquely positioned
as the world continues to electrify and adopt sustainability
practices. For further information, refer to the Description
of the Business section of this MD&A.
Our President and Chief Executive Officer, John
decarbonization
about
Kousinioris,
journey below.
speaks
our
What role do you see natural gas
generation having in a successful
energy transition?
“We believe that there are three factors that must be
balanced to ensure a successful energy transition:
reliability, decarbonization and affordability. We continue to
see a role in natural gas-fired generation enabling the
energy transition by ensuring the reliability of the electricity
grid. Today, our gas fleet, to be strengthened following
closing of the Heartland Generation acquisition, includes
peaking and baseload generation, which underpin the
reliability needs of our grid, as well as cogeneration
facilities, which serve customers critical to the industrial
sectors of our three core markets. We also work closely
with our
their
decarbonization goals. For example, we recently achieved
commercial operation for the Northern Goldfield solar and
battery storage project for BHP Nickel West in Western
Australia that is expected to reduce BHP's scope 2
GHG emissions.”
customers
industrial
support
to
transaction will continue to enable us to reduce our
emissions in the short term and to be carbon net-zero
by 2045.
We remain committed to investing in climate change
mitigation solutions to maximize value for our shareholders,
customers, local communities and the environment.”
For further information, refer to Climate Change Metrics
and Targets in the Decarbonizing Our Energy Mix section
of this MD&A.
TransAlta has adopted a 2045 net-zero
target. How will the Company achieve
this target?
"Our net-zero target is a testament of our growth strategy.
We are using the cash flows from our legacy thermal
generation assets to fund our transition to a generating
fleet focused on renewables and storage by creating
electricity solutions for our industrial and commercial
customers. In 2023, we revised our Clean Electricity
Growth Plan, which targets growing the Company’s
generation fleet by an incremental 1.75 GW — with
approximately $3.5 billion of capital expenditure — as well
as increasing our development pipeline of projects to 10
GW, each to be achieved by 2028. Our investment focus to
2028 will be on renewables and storage assets, responsive
and flexible generation to support reliability, and advancing
new technological solutions."
Following closing of the Heartland
Generation acquisition, will TransAlta
still be able to achieve its 2026
decarbonization target?
“Our commitment to decarbonization remains unchanged.
TransAlta’s target of a 75 per cent scope 1 and 2 GHG
emissions reduction by 2026 is estimated to align with the
Paris Agreement goal to limit global warming to 1.5°C and
is based on our 2015 scope 1 and 2 GHG emissions of 32.2
MT CO2e. The acquisition of the Heartland Generation
portfolio is aligned with our decarbonization commitment.
We will recalculate our 2015 emission baseline to include
emissions from Heartland Generation and expect this
TransAlta Corporation 2023 Integrated Report
M69
Our 2023 Sustainability Performance
In 2023, TransAlta's strong safety performance was a key accomplishment amongst our social performance metrics. Our
Total Safety Report Frequency and Total Recordable Injury Frequency ("TRIF") exceeded our performance targets.
Performance against our 2023 sustainability targets is outlined below. Target year means by Dec. 31 of that year.
ESG Alignment: Environmental
Sustainability goal
Sustainability target
Results
Comments
Reduce GHG emissions By 2026, achieve a 75 per cent
reduction of scope 1 and 2 GHG
emissions from 2015 base year(1)
On track
Since 2015, we have reduced scope 1 and
2 GHG emissions by 21.3 MT CO2e or
66 per cent
By 2045, achieve net-zero for 100
per cent of TransAlta’s scope 1 and
2 GHG emissions(2)
By 2024, verify and disclose 80
per cent of TransAlta’s scope 3
emissions(3)
By 2026, achieve a 95 per cent
reduction of SO2 emissions and an
80 per cent reduction of NOx
emissions below 2005 levels
On track
On track
Achieved
Reduce air emissions
We completed a pre-assessment of 80 per
cent of TransAlta’s scope 3 emissions to
prepare for limited assurance in 2024
Our total air emissions in 2023 retained
similar performance to 2022 levels. We
achieved this target in 2022 through the
reduction of our SO2 emissions by 98 per
cent and NOx emissions by 83 per cent
from 2005 levels
Reclaim land utilized
for mining
By 2040, complete full reclamation
of our Centralia coal mine
in
Washington State
On track
Reclamation work at Centralia is underway
and 40 per cent of the coal mine land has
been reclaimed
By 2046, complete full reclamation
of our Highvale coal mine in Alberta
On track
Our Highvale coal mine in Alberta closed in
2021. Reclamation work is underway and
22 per cent of the coal mine land has
been reclaimed
Responsible water
management
By 2026, reduce fleet-wide water
consumption
(withdrawals minus
discharge) by 20 million m3 or 40
per cent over a 2015 baseline
Achieved
in 2022
Water consumption increased to 30 million
m3 in 2023 primarily due to an increase in
production compared to last year. We
achieved this target in 2022 through the
reduction
fleet-wide water
consumption by approximately 20 million
m3 or 43 per cent from 2015 levels
our
of
Protecting nature and
biodiversity
By 2024, assess and disclose
nature-related
and
opportunities including TransAlta’s
dependencies and
impacts on
ecosystems, land, water and air
risks
Achieve zero biodiversity-related
incidents(4)
On track
Assessment of nature-related risks and
opportunities is underway
Achieved We
recorded zero
(0) biodiversity-
related incidents
(1) TransAlta does not plan to use carbon credits to achieve its 2026 GHG emissions reduction target.
(2) The Company may choose to neutralize residual emissions from gas-fired generation through fuel switching, new technologies or nature-based
solutions to achieve its 2045 net-zero target. For further information, refer to Climate Transition Plan in the Decarbonizing Our Energy Mix section of
this MD&A.
(3) To calculate TransAlta's scope 3 GHG emissions, we rely on third-party data that is available only after the first quarter of each year. As a result, this
target means reporting on 2023 scope 3 GHG emissions data in 2025 following the verification of data by independent third-party providers in 2024.
(4) This means biodiversity-related incidents that affected habitats and species included on the Red List of the International Union for Conservation of
Nature and are classified as near-threatened, vulnerable, endangered and critically endangered.
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TransAlta Corporation 2023 Integrated Report
ESG Alignment: Social
Sustainability goal
Sustainability target
Results
Comments
Reduce safety incidents
Achieve a Total Recordable Injury
Frequency rate below 0.32
Achieved We achieved a TRIF rate of 0.30
compared to 0.39 in 2022. Our strong
safety performance can be attributed to
our focus on maturing our safety culture,
assessing
and
reducing
and
tolerance
addressing
standardizing safety
information and
data collection technology
hazards,
risk
Integrate sustainability
into supply chain
By 2024, 80 per cent of our spend
will be with suppliers that have a
sustainability policy or commitment
On track
Support prosperous
Indigenous communities
Support equal access to all levels
for youth and
of education
through
Indigenous
financial
and
employment opportunities
peoples
support
Achieved
On average, 78 per cent of our
in 2022 and 2023 was with
spend
suppliers that have a sustainability policy
or commitment
Support represented a total value of
$453,000, or 14 per cent of TransAlta’s
total community investment
cultural
Indigenous
Provide
awareness training to all TransAlta
employees by the end of 2023
Achieved We provided
Indigenous awareness
training to all Canadian, Australian and
US employees
ESG Alignment: Governance
Sustainability goal
Sustainability target
Results
Comments
Strengthen gender
equality
Achieve 50 per cent
representation
by 2030
on
female
the Board
On track
As at Dec. 31, 2023, women represented
46 per cent of our Board composition
compared to 36 per cent in 2022(1)
Achieve at least 40 per cent female
employment among all employees
of the Company by 2030
On track
As
at Dec. 31, 2023, women
represented 27 per cent of all
increase over 2022
employees, an
levels (26 per cent)
Maintain equal pay for women in
equivalent roles as men
Achieved We achieved a 97 per cent female/male
pay equity ratio. We strive to maintain
this ratio within a deviation of plus or
minus three per cent
Demonstrate leadership
on ESG reporting within
financial disclosures
Maintain our position as a leader on
integrated ESG disclosure through
increased annual alignment with
sustainability
leading
disclosure frameworks
Achieved
TransAlta's MSCI ESG Rating was
upgraded to 'AA' from 'A'. The upgrade
reflects the Company's strong renewable
energy growth compared to peers. We
also received an award for best ESG
reporting (mid-cap) by the IR Magazine
Canada.
TransAlta
the most
demonstrated
among
comprehensive
utilities companies assessed
the
in
inaugural Climate Engagement Canada
Net Zero Benchmark, which evaluates
corporate
towards
issuers’ progress
aligning with the Paris Agreement’s goals
2023,
some of
disclosures
In
(1) Board composition includes all independent and non-independent directors.
TransAlta Corporation 2023 Integrated Report
M71
ESG Alignment: Environmental and Social
Sustainability goal
Sustainability target
Results
Comments
Coal transition
No further coal generation by the
end of 2025 with 100 per cent of
our owned net generation capacity
to be from renewables and gas
On track
Clean energy solutions
for customers
support
Develop new renewable projects
customer
that
sustainability goals to achieve both
long-term power price affordability
and carbon reductions
On track
We retired 670 MW of Centralia at
Dec. 31, 2020. In 2021, we retired or
converted all coal plants in Canada and
closed the Highvale coal mine, thus
ceasing all coal generation in Canada.
Our remaining Centralia plant in the US is
set to retire on Dec. 31, 2025
Since 2021, we have added over 800
MW of new capacity through renewable
projects such as Windrise (206 MW),
Garden Plain
(130 MW), Northern
Goldfields Solar (48 MW), White Rock
(300 MW) and Horizon Hill (200 MW). We
also acquired TransAlta Renewables (1.2
GW) in 2023 and North Carolina Solar
(122 MW) in 2021. In 2023, our Clean
Electricity Growth Plan was updated to
continue our priorities. By 2028, the plan
will see the Company execute on an
incremental 1.75 GW of renewables
growth and a 10 GW growth pipeline
review setting new
In 2024, we will continue
environmental targets for GHG emissions, air emissions
and water consumption consistent with our commitment to
continuously improve our environmental performance.
to
Targets are outlined below. Target year means by Dec. 31
of that year.
2024+ Sustainability Targets
Our 2024 and longer-term sustainability targets support
the success of our business so that the Company will
continue to be positioned as an ESG leader in the future.
Goals and targets are established to improve our ESG
performance and manage current and emerging material
sustainability issues in support of the United Nations
Sustainable Development Goals ("UN SDGs") and the
Future-Fit Business Benchmark, which also defines
sustainable goals for businesses. TransAlta is committed to
decarbonizing our energy generation and accelerating
clean energy growth. We believe that we can make a
greater positive impact on UN SDG 7 “Affordable and Clean
Energy” and SDG 13 “Climate Action”, while supporting
seven other SDGs.
Our 2024 and long-term sustainability targets reflect on
incremental change from the sustainability targets set in
2023. Specifically, TransAlta updated two sustainability
targets in the areas of safety and Indigenous cultural
awareness, while maintaining our climate-related targets to
achieve net-zero for 100 per cent of TransAlta’s scope 1
and 2 GHG emissions by 2045 and to reduce 75 per cent
of our scope 1 and 2 GHG emissions by 2026 from a 2015
base year. This target covers 100 per cent of TransAlta's
operating assets and is estimated to align with the
electricity sector decarbonization pathway to limit global
warming to 1.5°C, as one of the Paris Agreement goals.
M72
TransAlta Corporation 2023 Integrated Report
ESG Alignment: Environmental
Sustainability goal
Sustainability target
Alignment with UN SDG Target or Future-Fit
Business Benchmark
Reduce GHG emissions By 2026, achieve a 75 per cent
reduction of scope 1 and 2 GHG
emissions from 2015 base year(1)
By 2045, achieve net-zero for 100
per cent of TransAlta’s scope 1 and
2 GHG emissions(2)
By 2024, verify and disclose 80 per
scope
cent
3 emissions(3)
TransAlta’s
of
UN SDG Target 13.2: "Integrate climate change
measures
strategies
and planning"
policies,
national
into
Reduce air emissions
By 2026, achieve a 95 per cent
reduction of SO2 emissions and an
80 per cent reduction of NOx
emissions below 2005 levels
Reclaim land utilized
for mining
By 2040, complete full reclamation
in
of our Centralia coal mine
Washington State
UN SDG Target 9.4: "By 2030, upgrade infrastructure
and retrofit industries to make them sustainable, with
resource-use efficiency and greater
increased
adoption of clean and environmentally sound
technologies and industrial processes"
Future-Fit Business Benchmark: "Positive Pursuits 13:
Ecosystems are restored"
By 2046, complete full reclamation
of our Highvale coal mine in Alberta
Future-Fit Business Benchmark: "Positive Pursuits 13:
Ecosystems are restored"
Responsible water
management
Protecting nature and
biodiversity
By 2026, reduce fleet-wide water
consumption
(withdrawals minus
discharge) by 20 million m3 or
40 per cent over the 2015 baseline
By 2024, assess and disclose
nature-related
and
opportunities including TransAlta’s
dependencies and
impacts on
ecosystems, land, water and air
risks
Achieve zero biodiversity-related
incidents(4)
UN SDG Target 6.4: "By 2030, substantially increase
water-use efficiency across all sectors and ensure
sustainable withdrawals and supply of freshwater to
address water scarcity and substantially reduce the
number of people suffering from water scarcity"
UN SDG Target 15.5: "Take urgent and significant
action to reduce the degradation of natural habitats,
halt the loss of biodiversity and, by 2020, protect and
prevent the extinction of threatened species”
(1) TransAlta does not plan to use carbon credits to achieve its 2026 GHG emissions reduction target.
(2) The Company may choose to neutralize residual emissions from gas-fired generation through fuel switching, new technologies or nature-based
solutions to achieve its 2045 net-zero target. For further information, refer to Climate Transition Plan in the Decarbonizing Our Energy Mix section of
this MD&A.
(3) To calculate TransAlta's scope 3 GHG emissions, we rely on third-party data that is available only after the first quarter of each year. As a result, this
target means reporting on 2023 scope 3 GHG emissions data in 2025 following the verification of data by independent third-party providers in 2024.
(4) This means biodiversity-related incidents that affected habitats and species included on the Red List of the International Union for Conservation of
Nature and are classified as near-threatened, vulnerable, endangered and critically endangered.
TransAlta Corporation 2023 Integrated Report
M73
ESG Alignment: Social
Sustainability goal
Sustainability target
Alignment with UN SDG Target or Future-Fit
Business Benchmark
Reduce safety incidents Achieve a Total Recordable Injury
Frequency rate below 0.32 with a
goal of 0.00
UN SDG Target 8.8: "Protect
labour rights and
promote safe and secure working environments for
in
all workers,
particular women migrants,
in
precarious employment"
including migrant workers,
those
and
Integrate sustainability
into supply chain
By 2024, 80 per cent of our spend
will be with suppliers that have a
sustainability policy or commitment
UN SDG Target 12.7: “Promote public procurement
practices that are sustainable, in accordance with
national policies and priorities”
Support prosperous
Indigenous
communities
Support equal access to all levels of
education for youth and Indigenous
peoples through financial support
and employment opportunities
levels of education and vocational
UN SDG Target 4.5: "By 2030, eliminate gender
disparities in education and ensure equal access to
all
training
persons with
for
in
disabilities,
vulnerable situations"
vulnerable,
including
Indigenous peoples and children
the
Indigenous
training during
Provide
awareness
onboarding
TransAlta employees
of
all
cultural
the
new
UN SDG Target 12.8: "By 2030, ensure that people
everywhere have
information and
awareness for sustainable development and lifestyles
in harmony with nature"
relevant
the
ESG Alignment: Governance
Sustainability goal
Sustainability target
Strengthen gender
equality
Demonstrate leadership
on ESG reporting within
financial disclosures
Achieve 50 per cent
the
representation
by 2030
on
female
Board
Achieve at least 40 per cent female
employment among all employees
of the Company by 2030
Maintain equal pay for women in
equivalent roles as men
Maintain our position as a leader
integrated ESG disclosure
on
through increased annual alignment
with
sustainability
disclosure frameworks
leading
ESG Alignment: Environmental and Social
Sustainability goal
Sustainability target
Coal transition
Clean energy solutions
for customers
No further coal generation by the
end of 2025 with 100 per cent of
our owned net generation capacity
to be from renewables and gas
Develop new renewable projects
that support customer sustainability
goals to achieve both long-term
power price
and
carbon reductions
affordability
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TransAlta Corporation 2023 Integrated Report
Alignment with UN SDG Target or Future-Fit
Business Benchmark
UN SDG Target 5.5: "Ensure women’s full and
effective participation and equal opportunities for
leadership at all levels of decision making in political,
economic and public life"
12.6:
UN SDG Target
"Encourage companies,
especially large and transnational companies, to adopt
sustainable practices and to integrate sustainability
information into their reporting cycle"
Alignment with UN SDG Target or Future-Fit
Business Benchmark
UN SDG Target 7.1: "By 2030, ensure universal access
to affordable, reliable and modern energy services"
UN SDG Target 7.2: "By 2030, increase substantially
the share of
the global
renewable energy
energy mix"
in
Decarbonizing Our Energy Mix
ESG is more than a business strategy at TransAlta; it is a
competitive advantage. Sustainability is one of our core
values; therefore, we strive to integrate climate change
into governance, decision-making, risk management and
our day-to-day business operations. The outcome of our
climate change focus is continuous improvement on key
climate-related issues and ensuring our economic value
creation is balanced with a value proposition for the
environment and people.
We recognize the impact of climate change on society and
our business both today and into the future. Our renewable
energy journey began 112 years ago when we built the first
hydro assets in Alberta, which still operate today. In 1993,
we began operating our first wind facility, which was the
first commercial wind facility in Canada; in 2014, acquired
our first solar facility; and, in 2020, constructed our first
battery storage facility. Today, we operate 57 renewable
facilities across Canada, the US and Australia.
Our reporting on climate change management has been
guided by the TCFD recommendations since 2018. In
2023, we adopted guidance from IFRS S2, which is based
on the TCFD recommendations with industry-specific
climate metrics based on the SASB standards. IFRS S2 and
TCFD help inform discussion and provide context on how
climate change affects our business.
Strategy and Risk Management
Climate Change Strategy
As described in the following sections, our risks and
opportunities assessment and climate scenarios analysis
support the development and continuous improvement of
our climate change strategy. We actively monitor and
manage climate-related risks and opportunities as part of
our overall business strategy to ensure we remain resilient
across scenarios.
TransAlta remains committed to creating a path to
resiliency in a decarbonizing world in support of the goals
adopted under the Paris Agreement, and the goals adopted
during subsequent international climate meetings. Our
strategy is focused on the operation of our existing assets
(wind, hydro, solar, natural gas, battery storage and
transition-coal), the phase-out of coal-fired electricity
generation, and the development of renewable energy and
storage projects. Our customers are
increasingly
integrating ESG
their business decisions;
risk
therefore, we see an advantage in growing our renewable
power business to support our customers' sustainability
goals. Our investments and growth in renewable energy
are highlighted by our portfolio of renewable energy-
generating assets. From 2000 to 2023, we grew our
nameplate renewables capacity from approximately 900
into
MW to over 2,900 MW. Today, our diversified renewable
fleet makes us one of the largest renewable power
producers in North America, one of the largest producers
of wind power in Canada and the largest producer of hydro
power in Alberta.
is
through
environmental
Another way we contribute to our customers’ sustainability
goals
attributes. The
environmental attributes that we generate include carbon
offsets, renewable energy credits and emission offsets.
Our customers can use environmental attributes to lower
compliance costs attributed
to carbon policies or
renewable portfolio standards. Furthermore, environmental
attributes
corporate
achieve
sustainability or carbon reduction goals. To combat the
challenges of renewable energy intermittency, we continue
to invest in battery storage and evaluate the role of natural
gas to provide increased reliability and flexibility.
can help
voluntary
II wind
In 2020, we launched WindCharger, a "first-of-its-kind in
Alberta" battery storage project that stores energy
produced by our Summerview
facility and
discharges electricity onto the Alberta grid during system
supply shortages, as well as providing critical system
support services to the system operator. This project
received co-funding from Emissions Reduction Alberta.
Further, in 2021, we agreed to provide solar electricity
supported with a battery energy storage system to BHP
Nickel West through the construction of the Northern
Goldfields hybrid solar project in Western Australia. The
Northern Goldfields solar and battery storage facilities
were commissioned in 2023 and are expected to reduce
its Nickel West
BHP's scope 2 GHG emissions at
operations by 12 per cent. In 2022, TransAlta entered into
an agreement for the expansion of the Mount Keith 132kV
transmission system. The expansion is underway, with
expected completion in the first quarter of 2024. In 2023,
TransAlta’s early-stage development pipeline included in
excess of 1 GW from four energy storage projects
in Canada.
In support of our own path to build resilience to climate
change, we have taken significant steps to reduce our
carbon footprint over the last several years. In 2021, we
adopted a more stringent climate-related target to reduce
75 per cent of our scope 1 and 2 GHG emissions by 2026
from a 2015 base year. This target covers 100 per cent of
TransAlta's operating assets and is estimated to align with
the electricity sector decarbonization pathway to limit
global warming to 1.5°C, as one of the Paris Agreement
goals. Furthermore, we adopted a long-term climate-
related target to achieve net-zero for 100 per cent of
TransAlta’s scope 1 and 2 GHG emissions by 2045. This
ambitious target aligns us with the Canadian Net-Zero
Emissions Accountability Act to achieve net-zero emissions
by 2050.
TransAlta Corporation 2023 Integrated Report
M75
Our Climate Transition Plan defines TransAlta's past, short-
term (2024-2025) and medium- to long-term actions
(beyond 2026). For each of these actions, we assessed our
ability to control ("C") intended outcomes, partner ("P")
with stakeholders to drive outcomes or influence ("I")
outcomes
our
will
decarbonization targets.
achieve
help
that
us
this MD&A.
The highest level of climate change oversight, including
the actions of our Climate Transition Plan, is at the Board
level. For further information, refer to Oversight by the
Board of Directors in the Climate Change Governance
Information on executive
section of
compensation
is
described in ESG-Linked Compensation in the Building a
Diverse and Inclusive Workforce section of this MD&A.
Metrics and targets supporting our Climate Transition Plan,
including climate-related financial metrics, are described in
Climate Change Metrics and Targets in the Decarbonizing
Our Energy Mix section of this MD&A.
to climate-related
targets
linked
We are also taking strategic steps to decarbonize the
power sector and support the energy transition. In 2021,
we set out clear targets under the Clean Electricity Growth
Plan. Since 2021, the Company added 800 MW of new
capacity and acquired TransAlta Renewables (1.2 GW) and
North Carolina Solar (122 MW). In 2023, our Clean
Electricity Growth Plan was updated to continue our
priorities. By 2028, the plan will see the Company execute
on an incremental 1.75 GW of renewables growth and a 10
GW growth pipeline. In 2025, we will retire our single
remaining coal unit, located in the US, to complete
TransAlta's transition away from coal generation.
To date, we have retired 4,664 MW of coal-fired
generation capacity since 2018 while converting 1,659 MW
to natural gas. Comparatively, our converted natural gas
units' CO2 intensity is approximately 57 per cent less than
coal generation. Repurposing the facilities rather than
decommissioning them reduces the cost and emissions
associated with new construction and aligns with the UN
SDGs, specifically "Goal 9:
Innovation and
Infrastructure." The completed conversions and the closure
of the Highvale coal mine also contribute to the goals of
the Powering Past Coal Alliance, which TransAlta joined in
2021 at COP26.
Industry,
We actively engage policymakers and stakeholders on how
to facilitate a transition where the electricity systems we
serve can reach net-zero emissions while maintaining
reliability. We will continue investing in renewables and
assessing the best options to deliver energy storage,
including incorporating learnings from our industrial-scale
battery into our Company strategy and sharing those
learnings with government. At the same time, natural gas
will play an essential role in the electricity sector, providing
dispatchable generation
to support current system
demands and a smooth energy transition. We always seek
energy-efficiency
to
achieve emissions reductions at competitive costs. Further,
we are committed to investing in climate change mitigation
solutions
for our shareholders,
customers, local communities and the environment.
improvements and opportunities
to maximize value
Climate Transition Plan
reviewed and updated
A climate-related transition plan describes how a company
aims to minimize climate-related risks and
increase
opportunities, in alignment with IFRS S2 and TCFD. In
its Climate
2023, TransAlta
Transition Plan, which lays out our approach to reducing
operational and value chain emissions to deliver net-zero
operations by 2045. In addition, our Climate Transition Plan
transition
finance and
includes sustainable
actions reflecting TransAlta's commitment to a successful
transition toward a low-carbon economy. For further
information,
the
Decarbonizing Our Energy Mix section of this MD&A and
Inclusive Transition in the Engaging with Our Stakeholders
to Create Positive Relationships section of this MD&A.
to Sustainable Finance
inclusive
refer
in
M76
TransAlta Corporation 2023 Integrated Report
Delivering Net-Zero Operations by 2045
Hydro
Wind and Solar
Past actions
Became the largest producer of
hydro power in Alberta (C)
From 2000 to 2023, we grew our
nameplate renewables capacity
by approximately 2,000 MW (C)
Battery Storage
First battery storage
delivered in 2020 (C)
facility
2023,
completed
In
the
construction of a 48 MW solar
and battery storage system in
Australia (C)
Natural Gas
Completed
conversions
2021 (C)
our
in Canada
coal-to-gas
in
Converted 1,659 MW from coal to
natural gas since 2018 (C)
Emerging
Abatement
Technologies and
Solutions
exploring
Started
new
technologies such as storage,
hydrogen and carbon capture (P)
In 2023, continued to support the
development of low-cost, low-
emissions hydrogen production
through $2 million investment in a
Canadian-based venture (P)
In 2023, started partnership with
leading global companies
to
target early-stage revolutionary
technologies through a US$25
million
in a deep
decarbonization fund (P)
investment
In 2023, started an electric
vehicle pilot project in our hydro
operations (C)
Energy Transition
(Coal)
Retired 4,664 MW of coal-fired
generation capacity since 2018
including ending coal generation
in Canada in 2021 (C)
Short-term actions
(2024-2025)
Medium to long-term actions
(2026 +)
Advance 1500 MW of early-stage
wind and solar projects
in all
jurisdictions (C)
development
Complete
and
commence construction on 100
MW wind project in Canada (C)
Deliver an incremental 1.75 GW of
clean electricity capacity by 2028 (C)
Deploy approximately $3.5 billion of
growth capital by 2028 (C)
Expand our growth pipeline to 10 GW
by 2028 with focus on renewables
and storage (C)
development
Complete
and
commence construction on 180
MW battery storage in Canada (C)
Evaluate
storage
facilities where appropriate (C)
and deploy battery
renewable
alongside
Operate simple-cycle, combined-
cycle and cogeneration facilities in
Canada, the United States and
Australia (C)
Neutralize residual emissions from
through
gas-fired generation
fuel
switching, new
technologies or
nature-based solutions (C)
Assess deployment of nature-
based or engineered solutions to
neutralize
gas-fired
unabated
generation where appropriate (C)
Evaluate use of renewable and
low-carbon natural gas (C)
potential
Identify the next generation of
power solutions and technologies
parallel
and
investments
new
complementary sectors by the end
of 2025 (P)
for
in
to
ways
Assess
customers
decarbonization
beyond electrification (P)
with
support
broader
technologies
Identify opportunities to partner,
pilot and deploy novel, net-zero
generation technologies (P)
Assess and deploy GHG removal
technologies where appropriate (C)
Evaluate the electrification of our
vehicle fleet (C)
Continue to execute reclamation
work at our coal mines (C)
Contribute to a circular economy
through mining waste reuse or by-
product sales (C)
Deploy new net-zero generation
technologies and solutions where
appropriate (C)
Choose materials, products and
processes that generate fewer GHG
through energy
emissions, mainly
savings (C)
Evaluate the electrification of our
vehicle fleet (C)
Cease coal generation by 2026 (C)
full
Complete
in
Washington State by 2040 and in
Alberta by 2046 (C)
reclamation
Legend: (C) Control intended outcomes, (P) partner with stakeholders to drive outcomes, and (I) influence outcomes that will help us achieve our
decarbonization targets.
TransAlta Corporation 2023 Integrated Report
M77
Delivering Net-Zero Operations by 2045 (Continued)
Past actions
Short-term actions
(2024-2025)
Medium to long-term actions
(2026 +)
Supply Chain
Enhanced supplier management
functionality within the corporate
procurement system (C)
Develop ESG criteria for supply
chain engagement (C)
Understand direct suppliers, GHG
emissions profile and targets (C)
Incorporate ESG data reporting
capability
corporate
in
procurement system (C)
to explore
Engage with suppliers
enhancement of their GHG emissions
reduction targets (I)
Set direction for engaging suppliers
reduction
with
targets (C)
emissions
GHG
Value Chain
Disclosed range of scope 3 GHG
emissions at company level (C)
Update scope 3 GHG emissions
reporting methodology (C)
Consider scope 3 GHG emissions
targets (C)
Verify and disclose 80 per cent of
our total scope 3 emissions (C)
Continue to evaluate the use of
financing
sustainable or green
renewable
instruments
energy
storage
projects (C)
fund
battery
and
to
ESG
Link
employees’
remuneration (C)
performance
and
to
executive
Sustainable
Finance
In 2021, converted existing $1.3
billion loan into a Sustainability-
Linked Loan aligned with GHG
emissions reduction and female
employment
the
company level (C)
targets
at
In 2021, secured $173 million green
bond financing for eligible wind
project in Alberta (C)
In 2022, issued US$400 million
Senior Green Bonds for eligible
renewable energy and energy-
efficiency projects (C)
ESG
Linked
employees’
remuneration (C)
performance
and
to
executive
Inclusive
Transition
Developed a
Diversity and
strategy (C)
five-year Equity,
(ED&I)
Inclusion
Expand number of employee
resource groups available (C)
Conducted ED&I census to help
drive a greater sense of belonging
for all employees (C)
Set employee engagement and
ED&I targets as part of ESG-linked
compensation (C)
In 2023, launched two employee
resource groups (C)
In 2023, provided
Indigenous
cultural awareness training to all
employees (C)
to
In 2015, announced community
investment of US$55 million over
support energy
10 years
and
efficiency,
community
and
education and retraining initiatives
in Washington State (P)
economic
development
In 2016, agreed to invest in the
communities
the
phase-out of coal generation in
Alberta (P)
impacted by
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TransAlta Corporation 2023 Integrated Report
Adapt workplaces to incorporate
structural changes for
inclusive
work environments (C)
Deliver year-round ED&I learning
and awareness, and celebration
campaigns (C)
energy
Continue
investment
communities of up
million by 2025 (P)
transition
in Washington State
to US$55
to
invest
in
impacted by
the
Continue
the
communities
phase-out of coal generation in
Alberta (P)
Indigenous
Strengthen
focused
engagement
community
partnership opportunities (P)
on
and
investment
relations
community
consultation,
and
Promote supplier diversity in our
operations (C)
to evaluate
the use of
Continue
sustainable
financing
instruments to grow our renewables
and storage capacity (C)
green
or
Link ESG performance to employees’
and executive remuneration (C)
Enhance recruitment and retention of
female employees to achieve gender-
based targets (C)
succession practices
Maintain
to
increase female representation at senior
management level (C)
female
Increase
in
Generation by encouraging women to
pursue a career in electricity (C)
representation
Enhance opportunities
suppliers
processes (C)
our
in
for diverse
procurement
Continue to enhance our Indigenous
partnership
relations
opportunities with local communities (P)
focused
on
Ongoing support to local community
organizations
our
aligned
community investment pillars where we
operate and grow communities (P)
with
Climate Change Governance
toward
Climate-related risks and opportunities can significantly
impact our business, especially regulatory changes and
lower-carbon
shifting customer preferences
energy. Therefore, we actively manage
risks and
opportunities so that we can continue to grow and achieve
our goals. Climate-related issues are identified at every
level of management, including the Board, executive team,
business units and corporate functions (for example,
government
trading,
sustainability, commercial, customer relations, investor
are
relations).
acknowledged and addressed at the most senior levels of
the Company (including at the Board and executive level)
has allowed us to establish actionable emissions reduction
through
targets and grow our generation capacity
renewable energy and storage.
regulatory, emissions
climate-related
relations,
Ensuring
issues
Oversight by the Board of Directors
The highest level of climate change oversight is at the
Board level, with specific oversight of certain aspects of
the Company's
to climate change being
delegated to our Governance, Safety and Sustainability
Committee
(“GSSC”), our Audit, Finance and Risk
Committee ("AFRC") and our Investment Performance
Committee (“IPC”) of the Board.
response
the GSSC assists the Board
Meeting quarterly,
in
monitoring and assessing compliance with climate change
regulation and reporting. The GSSC receives management
reports on changes in climate-related legislation and the
potential impact of policy developments on TransAlta's
business. The GSSC then supports the Board in assessing
and overseeing Company-wide climate change strategies,
policies and practices. The GSSC also
reviews
environmental protection guidelines, including with respect
whether
to
being
our
effectively implemented.
GHG mitigation,
environmental
procedures
considers
and
are
The AFRC and IPC also play a role in managing TransAlta's
climate-related risks and opportunities. The AFRC assists
the Board in overseeing the integrity of our consolidated
financial statements and considers climate risks and
opportunities as it relates to our financial decision-making.
Further, the AFRC
is responsible for approving our
Commodity and Financial Exposure Management policies
and reviewing quarterly ERM reporting. The IPC considers
and assesses risks related to capital investment projects,
including overseeing climate
risk assessments and
mitigation plans. As a result, climate-related capital
expenditures, acquisitions and budgets are reviewed by
the AFRC and IPC on a case-by-case basis.
The Board reviews and updates the Company's strategy
annually. In 2023, the Board's strategic planning sessions
issues considering growth
included climate-related
three of our 13 Board members
initiatives and strategies, capital allocation, ESG policy
development and other matters. Our Board is composed of
individuals with a mix of skills, knowledge and experience
critical to our strategy success and business growth. In
2023,
identified
environment/climate change among their top four relevant
competencies. Given the breadth of experience and skills
of each director, the skills matrix lists only the top four
competencies possessed by each director nominee based
on the Board’s assessment and each director’s self-
evaluation. The criteria used to assess competence of
Board members on climate-related issues includes the
knowledge of corporate responsibility practices and the
constituents
sustainable development
practices, including as it pertains to climate change.
involved
in
further
information
For
regarding Board members
competence on climate-related issues, refer to TransAlta's
Management Proxy Circular.
Role of Senior Management
TransAlta’s President and CEO maintains the highest level
of oversight on climate-related issues at the executive
level. Senior management of the Company, including our
President and CEO, provide the Board with updates on
climate-related risks and opportunities to inform business
strategy and ensure alignment with TransAlta’s GHG
emissions reduction goals.
Our business units and corporate functions work closely
together to support the executive team in understanding
climate-related risks and opportunities, including legislative
developments. Our executive team reviews such risks and
opportunities quarterly and reports to the GSSC and AFRC,
as applicable.
At the business unit level, climate change risks are
identified through our Total Safety Management System,
asset management function and systems, energy and
trading business, communication with stakeholders, active
monitoring and participation in working groups.
Notably, we tie a component of executive compensation to
reducing GHG emissions and climate change management.
We link our annual incentive plans (short-term incentive
and long-term incentives) to our strategic goals. Our
strategic goals
renewable energy,
reducing GHG emissions and supporting our customers'
sustainability goals to decarbonize through on-site low
carbon energy generation.
include growing
For further information on incentives for ESG performance,
refer to the discussion on ESG-Linked Compensation in
Building a Diverse and Inclusive Workforce section of
this MD&A.
TransAlta Corporation 2023 Integrated Report
M79
NZE represents a pathway for the global energy sector to
achieve net-zero emissions by 2050. This scenario also
assumes key energy-related SDGs are achieved through
universal energy access by 2030 and major improvements
in air quality. NZE is built upon the idea that a global
increase in electrification supports the journey to net-zero.
It assumes that an aggressive carbon price is set in
Canada, the US and Australia. It also assumes the power
sector reaches net-zero emissions by 2035 in advanced
economies while natural gas capacity is stable to 2030 and
declines significantly
into 2040. Like the SDS, NZE
assumes that beyond wind and solar, the energy system
relies on batteries, storage and some level of CCUS
and hydrogen.
In 2023, we reviewed the findings from the climate
scenario analysis and updated
the management
response accordingly.
Climate Scenarios
In 2021, we conducted climate scenario analysis to
understand risks and opportunities and assess our
strategy's resiliency under several potential future climate
scenarios. The analysis utilized scenarios
the
International Energy Agency’s ("IEA") 2020 World Energy
Outlook, a
large-scale simulation model designed to
replicate how energy markets function. We used three
scenarios:
Sustainable
Development
(“SDS”); and Net-Zero Emissions by
2050 (“NZE”).
(“STEPS”);
Policies
Stated
from
and
policies
environmental
In STEPS, the energy system has no major additional
enacted by
climate
government(s). STEPS assumes
that carbon pricing
continues in Canada while no carbon price is set in the US
or Australia. STEPS also assumes that the power sector
reduces emissions by 45 per cent by 2040 while natural
gas generation capacity increases. Finally, STEPS is limited
to the deployment of commercial-ready technologies,
including wind and solar.
In SDS, the goals of the Paris Agreement (2015) are
achieved, resulting in net-zero emissions by 2070. The
SDS assumes a rapid increase in clean energy policies and
investments that position the energy system to also
achieve key UN SDGs. In SDS, all current net-zero pledges
are achieved and there are extensive efforts to reduce
emissions. SDS assumes that carbon pricing continues in
Canada and is set in the US and Australia. It also assumes
that the power sector reduces emissions by 90 per cent by
2040 while natural gas capacity remains stable into 2030
and declines toward 2040. Finally, SDS assumes that
beyond wind and solar, the energy system relies on
batteries, storage and some level of carbon capture,
utilization and storage (“CCUS”) and hydrogen.
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TransAlta Corporation 2023 Integrated Report
Key Climate Scenario Findings
Using climate scenarios, we analyzed the resiliency of our
business and determined specific risks and opportunities
for our individual assets. All three scenarios present
opportunities for TransAlta’s growth related to renewables,
storage solutions and ancillary services. The scenario
analysis found that our wind and solar assets have the
highest prospects for growth, which aligns with our growth
strategy. Under all scenarios, hydro remains a valuable
asset as it allows for expansion to include storage.
The following sections highlight TransAlta's top risks, opportunities and management response across all scenarios.
Increased operational costs
Carbon price increases the cost of
natural gas operations. Additional
mandated emissions reductions could
force remaining plants to invest in
technologies like CCUS, increasing
the operating costs for natural gas
plants further. Natural gas assets in
the US and Australia face less risk
compared to assets in Alberta as they
are contracted and can pass down
carbon costs to their clients. Current
and anticipated
regional carbon
pricing monitoring is required to plan
and assess increases in operational
costs and impacts on new projects
and investments.
Top Identified Climate-Related Risks by Scenario
Increased competition
Decreased demand of
natural gas electricity
Description
increase
transition
This
in
Subsidies/funds available for clean
energy
as
governments aim to grow installed
capacity of renewables to meet
rising electricity demand
and
compensate
for the closure of
carbon-intensive power plants. In
Canada, it is expected that major
investments
grid decarbonization
will flow into Alberta as most other
provincial markets are heavily
regulated and/or are already low
increase
carbon.
will
competition
the merchant
market, making a large part of the
generating fleet frequently bid at
zero, driving down the average
price of dispatched electricity.
Simultaneously
of
renewables, expected to decline
across all scenarios, decreases the
to entry. These
capital barrier
increase
factors will
combined
competition for TransAlta. The IEA
scenarios do not provide clear
indication of electricity pricing and
how it can be affected by increased
competition. As such, this remains a
point
Some
structural market changes may be
required to guarantee returns for
power generators and successfully
decarbonize the grid.
uncertainty.
cost
the
of
if
pace
the
is slower
Demand for power from natural gas
declines as
the market shifts
towards cleaner power with gas
shifting to a reliability backstop role.
An additional decline from Canadian
oil and gas customers can occur as
oil production levels drop under
NZE and SDS. The transition to a
lower-carbon world will likely result
in volatility and market uncertainty.
Natural gas power may be
necessary to provide power in the
of
transition
decarbonization
than
expected in the scenarios or if grid-
scale storage solutions do not
develop/commercialize
as
modelled. In these cases, with coal
phased out, natural gas assets will
be
baseload
generation. This means that natural
gas assets may still play a role for a
energy
smooth
transition. Optimization of natural
gas assets
required, and
additional investments need to be
assessed with caution to consider
the pace of decarbonization and
consequent
risk of decreased
demand for natural gas power.
efficient
relied
and
for
on
is
TransAlta Corporation 2023 Integrated Report
M81
Increased competition
Decreased demand of
natural gas electricity
Increased operational costs
NZE
SDS
STEPS
will
By 2040, renewables are expected
to comprise over 85 per cent of the
total electricity generation in the
regions we operate. This surge in
renewables
increase
competition and drive electricity
on
pricing
availability and the cost of energy
storage. The change in electricity
prices
increased market
uncertainty are expected to impact
our profits.
depending
down
and
this
subsidies/funds
are
Fewer
scenario
expected under
to NZE. However,
compared
renewable costs will still decline
approximately 10 per cent in wind
and 55 per cent in solar by 2040
compared
levels. This
decline with some level of subsidy
and
will
potentially
electricity
decrease
prices, which is expected to impact
our profits.
competition
to 2019
increase
subsidies
While minimal
are
expected and the cost of entry will
not decline at the same rate as SDS
or NZE, renewable costs are still
expected to decline approximately
8 per cent in wind and 45 per cent
in solar by 2040 compared to 2019
levels. This will still cause an
increase
is
in competition
expected to be offset by additional
electricity demand and therefore it
is
impact
our profits.
expected
that
not
to
The share of natural gas electricity
generation is expected to decline
over 50 per cent in the regions in
which we operate by 2040
compared to 2019 levels. This lower
demand for natural gas power is
expected to impact our natural gas
assets if no management responses
are implemented.
Higher operational costs driven by an
increase in carbon price to US$205/
in all our
tonne CO2e by 2040
operating
(advanced
regions
economies under IEA scenarios) and
lower
is
expected to impact the profits from
our natural gas assets.
operational
capacity
Natural gas electricity generation
still falls over 50 per cent in North
in
America while remaining flat
Australia by 2040 when compared
to 2019 levels. Demand for natural
gas power is expected to decrease
at a slower pace than under NZE.
This could potentially impact our
no
natural
management
responses
are implemented.
assets
gas
if
to
Increase in operational costs would
happen at a slower rate compared to
NZE but carbon costs are still
reach US$140/tonne
expected
in all of our
CO2e by 2040
operating
could
potentially
the operational
capacity and profits from our natural
gas assets, depending on the ability
to pass carbon prices on through
our contracts.
regions.
impact
This
Natural gas electricity generation is
expected to increase over 15 per
cent in the regions in which we
operate by 2040 compared to 2019
levels. These changes are not
expected
to affect our natural
gas assets.
Operational costs are not expected to
significantly
this
scenario as only Canada sees a
carbon price in 2040.
increase under
Management
Response
competition),
Navigating the uncertainty around
market dynamics (structure, pricing
and
government
policies and planning is critical for
TransAlta. We use hedging and
PPAs to stabilize pricing and are
planning on leading clean energy
growth in the regions in which we
operate. See more details of our
risk management
strategy and
under the Climate Strategy section
and the Managing Climate Change
Risks and Opportunities section of
this MD&A.
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TransAlta Corporation 2023 Integrated Report
the coal
Optimize gas assets to maximize
value and cash flows to support
renewables and storage growth.
Our converted natural gas units'
CO2 intensity is approximately 57
per cent less than coal generation.
Repurposing
facilities
rather than decommissioning them
reduces the cost and emissions
associated with new construction
and aligns with the UN SDGs,
specifically
Industry,
Innovation and Infrastructure." In
parallel, we continue growing our
renewable fleet; by the end of 2025
we will have achieved a 100 per
cent portfolio mix of renewables
and natural gas.
"Goal 9:
We have taken significant steps to
reduce our carbon footprint. Since
2015, we have reduced scope 1 and 2
GHG emissions by 66 per cent. By
2026, we have a commitment to
reduce scope 1 and 2 GHG emissions
by 75 per cent from 2015 base year
and plan
to achieve net-zero
emissions by 2045. Further, our
corporate functions apply regionally
specific carbon pricing, both current
and anticipated, as a mechanism to
manage future risks of uncertainty in
the carbon market.
Top Identified Climate-Related Opportunities by Scenario
Renewables become major energy source
New technology development
Description
NZE
SDS
STEPS
Management
Response
from
these
for power
Opportunities to grow the renewable fleet exist across
all scenarios. Renewable assets (hydro, wind, solar) are
expected to become the default form of generation with
demand
types of assets
increasing. Hydro is likely to grow in value given
increased renewables penetration and the need for
reliable zero-emitting generation. This can make
hydroelectric power a stronger source of baseload
electricity in many regions. The decreasing cost of
renewables also facilitates the growth of a renewable
fleet, especially under NZE and SDS.
Opportunities for development of battery or hydroelectric
storage systems and ancillary services exist across all
scenarios as renewable energy continues to penetrate the
grid. Developments in these areas are required to keep
electricity flowing when the renewables in a region are not
producing. Storage is especially anticipated to play an
important role in the energy transition. Cost-competitive
battery storage enables greater adoption of renewables.
A growth of
renewable electricity generation of
approximately 950 per cent is expected by 2040
compared to 2019 levels. This results in renewables
comprising more than 85 per cent of the electricity
generation in the regions in which we operate. The
transition of hydro to baseload capacity is expected to
create upside for TransAlta. An increase in TransAlta’s
renewable capacity and demand are expected to enable
growth and higher revenues.
A growth of
renewable electricity generation of
approximately 550 per cent is expected by 2040
compared to 2019 levels. This results in renewables
comprising more than 75 per cent of the electricity
generation in the regions in which we operate. An
increase in TransAlta’s renewable capacity and demand
are expected to enable growth and higher revenues.
STEPS growth is muted relative to the other scenarios
but still sees a growth of renewables of 280 per cent by
2040 compared to 2019 levels. This growth will allow
approximately 50 per cent of electricity generation to
come from renewables in areas in which we operate by
2040. An increase in TransAlta’s renewable capacity
and demand are expected to enable growth and
higher revenues.
Increased revenues through access to new and emerging
markets are expected to enable growth and higher
revenues under NZE. With more than 85 per cent of
electricity in areas in which we operate made up of
renewables, there will be big steps forward in storage and
ancillary services technologies. Storage capacity
is
expected to grow to approximately 250 GW in the US
by 2040.
Increased revenues through access to new and emerging
markets are expected to enable growth and higher
revenues under SDS. A lower share of renewables than in
NZE will allow swing production to remain present;
however, growth in ancillary and storage capacity will still
be needed to support the market. Storage capacity is
expected to grow to approximately 110 GW in the US
by 2040.
Access to new and emerging markets would be limited
under this scenario compared to NZE and SDS. While
growth in renewables is expected, the need for new
technologies is not a necessity in this market and may not
be profitable. Therefore, our revenues are not expected to
be affected.
facilities across Canada,
Our renewable energy commitment began more than
100 years ago when we built the first hydro assets in
Alberta, which still operate today. We now operate 57
the US and
renewable
Australia. By the end of 2028, we expect 70 per cent of
our EBITDA to be derived from renewables. Our strategy
is focused on the operation of our existing assets (wind,
hydro, solar, gas, storage and coal) and
the
renewable energy, storage and
development of
responsive and flexible natural gas generation for
reliability. Our investments and growth in renewable
energy are highlighted by our portfolio of renewable
energy-generating assets. From 2000 to 2023, we grew
our nameplate renewables capacity from approximately
900 MW to over 2,900 MW. Today, our diversified
renewable fleet makes us one of the largest renewable
producers
largest
producers of wind power in Canada and the largest
producer of hydro power in Alberta.
in North America, one of the
To leverage this opportunity and combat the challenges
of renewable energy intermittency, we continue to invest
in battery storage. In 2020, we launched WindCharger, a
"first of its kind in Alberta" battery storage project that
stores energy produced by our Summerview II wind
facility and discharges electricity onto the Alberta grid
during system supply shortages. Further, in 2021, we
agreed to provide renewable solar electricity supported
with a battery energy storage system to BHP Nickel West
through the construction of the Northern Goldfields solar
project in Western Australia. This project was completed
in November 2023 and will support BHP in meeting its
emissions reduction targets and delivering lower-carbon,
sustainable nickel to its customers. In 2023, TransAlta’s
early-stage development pipeline included four energy
storage projects in Canada with a total capacity in excess
of 1 GW.
TransAlta Corporation 2023 Integrated Report
M83
risks
include
NZE: The most significant
increased
competition, decreased demand for natural gas and
increased operational costs due to increased carbon
pricing and emissions reduction mandates. The most
significant opportunities include a shift toward renewables
as the default energy source and new technology
developments, including battery storage systems and
ancillary services.
is worth noting that there are
additional risks and opportunities for TransAlta under NZE.
For example, changes in how energy market services are
offered could positively or negatively impact our business.
Further, as carbon credit policies evolve, so will our ability
to use credits. Lastly, as renewables become the primary
energy source, a rethinking of ancillary services will be
necessary but could create significant opportunities
for TransAlta.
It
SDS: The risks and opportunities remain the same under
SDS as NZE; however, the impacts are reduced as market
changes are slower and less extreme. Renewables still
become the primary electricity source and there are new
technology opportunities, particularly in batteries. Natural
gas electricity demand still declines by 2040. Carbon
pricing exists in the US and Australia, but the price is
reduced compared to NZE. Lastly, a reevaluation of
opportunity
ancillary
for TransAlta.
presents
services
still
an
STEPS: Under STEPS,
renewable generation sees
significant growth but does not become the predominant
energy source. Implementing new technologies is much
slower and the demand for batteries is reduced. The
demand for natural gas electricity does not decline and
there are no large-scale market changes making services,
pricing and ancillary services more stable. This removes
the risk associated with natural gas electricity demand but
eliminates the opportunity for growth in ancillary services.
Physical risks become more relevant under this scenario
than transitional risks.
To mitigate risks and capitalize on opportunities, we have
developed climate signposts to monitor the evolution of
future climate scenarios. Signposts are indicators that
suggest the likelihood of a particular climate scenario.
Examples of signposts include directional change in carbon
and oil prices. The findings from the climate scenarios and
these signposts work alongside our sustainability metrics
and targets to inform the evolution and resiliency of our
Company's
risk
management, opportunity assessment and planning
for uncertainty.
financial planning,
strategy
and
Managing Climate Change Risks and Opportunities
We actively monitor and manage climate-related risks
through our Company-wide ERM processes. In 2021, we
established a formal process to review specific risks using
climate scenario analysis. As previously mentioned, climate
change risks and opportunities are addressed at each of
the Board level, executive and management level, business
unit
level and through our corporate functions. The
business units and corporate functions work closely
together and provide information on risks and opportunities
to management, the executive team and the Board.
Climate change risks at the asset or business unit level are
identified through our Total Safety Management System,
asset management function and systems, energy and
trading business, communication with stakeholders, active
monitoring and participation
in working groups. All
identified material risks are added to our ERM register and
scored based on likelihood and impact. We do not consider
risks
isolation and major risks are the focus of
management response and mitigation plans. Further
discussion can be found in Reporting in the Governance
and Risk Management section of this MD&A.
in
We divide our climate change risks
into two major
categories as per IFRS S2 and TCFD guidance: (i) risks
related to the transition to a lower-carbon economy; and
(ii) risks related to the physical impacts of climate change.
Transition Risks to a
Lower-Carbon Economy
We actively aim to understand and manage the impact of
climate change on our business as the world shifts to a
lower-carbon society.
Policy and Legal Risks
Changes in current environmental legislation do have, and
will continue to have, an impact upon our operations and
our business in Canada, the US and Australia.
For a more detailed assessment of policy and regulatory
risks, refer to the Governance and Risk Management
section of this MD&A.
Canada
The Government of Canada has set out ambitious
objectives for carbon emissions reduction,
including
achieving a 40 to 45 per cent national emissions reduction
over 2005 levels by 2030, a net-zero electricity grid by
2035 and a net-zero national economy by 2050. The
Government plans to rely on several policy tools to achieve
its emissions objectives,
including carbon pricing,
emissions performance regulations, funding for industrial
energy transition, a Clean Fuel Regulation and incentives
for consumers.
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TransAlta Corporation 2023 Integrated Report
Canada’s provinces have significant jurisdiction over their
respective electricity sectors and play an important role in
setting carbon pricing policy and emissions performance
standards, as well as developing and operating their own
funding and incentive programs, subject to the federal
government's authority to set national carbon pricing
standards. Negotiation to align carbon pricing, funding and
regulatory standards will likely require significant effort and
create the risk of tension and misalignment between
federal and provincial governments.
Risks
• Escalation in carbon prices and emissions performance
regulation may impact TransAlta’s natural gas generation
fleet
in Canada as governments escalate policy
stringency to meet 2030, 2035 and 2050 targets.
• Increased government funding for
transition may create out of market
competing generation.
industrial energy
incentives for
• Regulatory
incentives,
including emissions reduction
crediting, may create out of market incentives for
competing generation.
• Lack of federal/provincial coordination with respect to
to
regulation may
lead
climate
and
investment uncertainty.
policy
Opportunities
• Independent estimates suggest that achieving Canada’s
climate targets will require a minimum of twice Canada’s
current non-emitting generation. This presents strong
policy alignment with TransAlta’s Clean Electricity Growth
Plan. Further, we continue to see strong private sector
demand for contracted zero emissions generation to
meet corporate sustainability goals.
• Government funding for innovative technology to reduce
emissions from the electricity sector offers TransAlta the
for
potential opportunity
uneconomic new technologies, which will enable the
Company to grow its ESG and policy-aligned generation
and energy storage fleet.
to gain project support
• Government support for industrial electrification and
consumer incentives mandates for electrification, such as
for the purchase of electric vehicles, will grow the
electricity load over time and create new opportunities
for contracted clean electricity generation.
Management Response
• TransAlta’s Clean Electricity Growth Plan positions our
company to meet the rapidly growing demand for
clean electricity generation driven by customers and
government policy.
• We are focused on developing and acquiring contracted
assets that provide long-term certainty with respect to
incentive
revenue and eligibility
available
programs. TransAlta
for government
assesses
actively
renewable energy
government
legislation and
programs to maximize, wherever possible, access to
project incentives.
tax
• Our clean and contracted growth
the
proportional Company exposure to potential policy and
regulatory decisions that negatively
impact natural
gas generation.
reduces
• Our coal-to-gas facilities fit within government plans to
continue providing reliable and competitively priced
electricity for consumers and industry.
• Our remaining natural gas facilities (non-coal-to-gas)
operate under contract, reducing TransAlta’s exposure to
changes in carbon pricing.
• TransAlta actively engages with
federal and
provincial governments in Canada to inform and influence
policy development to ensure that our generating fleet
continues to serve our customers as the country
undertakes a broader energy transition.
the
• We actively work, both directly and through industry
associations, to encourage governments to adopt a level
playing field within funding and crediting programs so
that all new emerging technology projects receive
equitable government incentives and funding.
• TransAlta actively engages with all relevant Canadian
governments to seek policy alignment across carbon
pricing and regulatory and funding programs to create
the greatest possible degree of investment certainty.
United States
The US Government has set out ambitious objectives for
carbon emissions reduction, including achieving a 50 to 52
per cent national emissions reduction over 2005 levels by
2030, a net-zero electricity grid by 2035 and a net-zero
national economy by 2050. The US does not have a
national carbon pricing regime but does offer federal
incentives for renewable generation and energy storage.
State and regional climate and market policies have a
significant impact on the pace of energy transition in the
US with many governments operating under renewable
portfolio standards and carbon pricing regimes. Similar to
Canada, independent estimates suggest that the US will
require substantial growth in zero-emissions generation to
meet its national climate targets.
Risks
• TransAlta operates two thermal generating facilities in
the US that could be subject to short-term climate policy
changes, but our exposure to this policy risk is low (refer
to Management Response below).
• Significant new federal incentives for clean energy could
increase competition in the renewables and energy
storage space.
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Opportunities
• Achieving government climate goals and private sector
sustainability commitments will
rapid and
sustained growth in zero-emissions electricity generation
over the coming decades. TransAlta’s Clean Electricity
Growth Plan is focused on providing renewable electricity
to contracted customers in a manner that aligned with
federal, state and private sector goals.
require
• US tax incentive programs offer significant support for
new renewable and energy storage projects, making the
US an attractive growth market.
Management Response
• TransAlta’s single coal unit in Washington State is subject
to a retirement agreement with the state government
that exempts the facility from any carbon regulation prior
to its end of life in 2025. TransAlta’s cogeneration unit at
Ada operates under a contract that reduces the
Company’s exposure to policy risk.
is
• Our Clean Electricity Growth Plan
focused on
developing and acquiring contracted assets that provide
long-term certainty with respect to revenue and eligibility
for government incentive programs. TransAlta actively
assesses available government renewable tax legislation
and programs to maximize, wherever possible, access to
project incentives.
Australia
The Australian Government has a 43 per cent national
emissions reduction target over 2005 levels by 2030 and a
goal to achieve a net-zero national economy by 2050.
Decarbonization efforts have been centered on funding for
clean technologies, upgrading the electricity grid to
support more renewables, regulating and reporting of GHG
emissions, and
incentivizing zero-emissions vehicle
adoption. Large GHG emitters are required to reduce their
scope 1 emissions under the Australian Government's
National Safeguard Mechanism
the
government has made recent changes to the SGM, these
changes are not expected to have a material impact on
TransAlta's assets. Australian state governments have all
adopted net-zero goals and a number of states have
interim targets for 2030 and 2040. These state policies
are driving demand for zero-emissions electricity and
energy storage.
("SGM"). While
Risks
• TransAlta’s Australian natural gas assets may face policy
risk related to changes in government policies but remain
well positioned
to
to mitigate
Management Response below).
those
(refer
risks
Opportunities
• Our Clean Electricity Growth Plan is focused on building
new, clean electricity generation in Australia and other
markets. Government policies and funding programs are
generally
types of projects
supportive of
contemplated within TransAlta’s strategy.
the
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TransAlta Corporation 2023 Integrated Report
• Strong corporate demand for clean electricity solutions in
Australia's natural resource sectors present opportunities
for TransAlta to leverage its existing expertise to help
customers meet regulatory requirements and reach their
decarbonization objectives.
Management Response
• Through our Clean Electricity Growth Plan, TransAlta
continues to deliver clean electricity solutions to natural
resource customers in Western Australia. Our growing
suite of technologies, including renewables and energy
storage, positions us to provide contracted solutions to
customers focused on the need for reliable and
sustainable energy.
• TransAlta also continues to assess opportunities to grow
our clean energy generation in alignment with Australia's
national and state climate goals.
• TransAlta’s assets are predominantly contracted with an
ability to pass through carbon compliance costs and
serve remote industrial load. As a result, the Company
faces reduced policy risk.
Technology Risks
the
technology
to support
risks and opportunities
low-carbon
Technological changes
transition present both
for
TransAlta. We evaluate existing and emerging impacts of
technology through our Energy Innovation team and our
ERM process. Examples of
risks and
opportunities include infrastructure changes (such as the
shift to distributed energy and away from large-scale
power generation infrastructure assets and projects) and
digitization combined with greater adoption of energy
efficiency (less use of our end product). Cost-competitive
battery storage will enable greater adoption of renewables
and a shift to a distributed power generation model. We
continue to evaluate battery storage for its financial
viability while monitoring the potential impact battery
technology could have on natural gas power generation. In
2020, we completed our first battery storage (10 MW)
project at one of our wind facilities in Southern Alberta. In
2023, we delivered a hybrid system of solar with battery
storage (48 MW) in Western Australia. We continue to
investigate the possibility of battery storage at our other
facility locations. Our teams continuously adopt improved
technology at each of our new developments, which helps
protect our shareholder value and maintain reliable and
affordable electricity delivery.
We are well-positioned to take advantage of technological
opportunities in storage through hydro and/or battery
power. We are also well-positioned to take advantage
of advancements in renewable technologies as we build
facilities. We will continue monitoring new
new
technologies such as storage, hydrogen and CCUS for
future deployment.
For further information on technology and innovation, refer
to the Enabling Innovation and Technology Adoption
section of this MD&A.
Market Risks
Acute Physical Risks
Our major market risks are associated with our coal and
natural gas assets. Increased costs for natural gas supply
due, in part, to carbon pricing changes could impact our
operating costs. We actively monitor market risks through
our energy marketing and asset optimization teams and
our ERM process. We manage the market risks to our coal
assets by converting them to natural gas and plan to fully
transition off coal by 2025. Further, our corporate functions
apply regionally specific carbon pricing, both current and
anticipated, as a mechanism to manage future risks of
in the carbon market. To simultaneously
uncertainty
manage our risks and leverage market opportunities, we
continue operating our hydro, wind and solar facilities and
are investing in expanding our renewable energy fleet.
We currently have over 30 renewable projects that are
either under construction or in the development stage. We
are committed to growing our clean energy fleet. Further,
we established Canadian, US and Australian clean energy
growth teams. In 2023, the Company established a
pipeline of potential growth projects in renewables that
includes 280 MW of advanced-stage development projects
along with 4,285 to 5,015 MW of projects in earlier stages
of development. Our renewable fleet makes our overall
portfolio more resilient to climate risk, provides increased
flexibility
incremental
environmental value through environmental attributes.
Lastly, we recognize the opportunity to grow our ancillary
services, such as systems support, providing flexibility to
the decarbonizing grid.
in generation
creates
and
Reputation Risks
Negative reputational impacts, including revenue loss and
reduced customer base, are evaluated through our ERM
process. In the past, we experienced negative reputational
impacts due to our coal operations, including a negative
impact on the market price of our common shares. Our
clear transition path away from coal mitigates this
reputational risk. As consumer trends move in favour of
renewable electricity, we are investing in a diversified mix
of renewable generation and optimizing our natural gas
fleet. We continue to actively monitor and manage
reputational risks by delivering renewable power solutions
while maintaining competitive costs and reliability.
Physical Risks of Climate Change
As we learn more about the physical risks associated with
climate change, we continue to consider acute and chronic
risks that could significantly impact our operations. We
continue to investigate the physical impacts of climate
change on our operating assets.
We have operating assets in three countries and varied
geographic locations, many of which could be impacted by
extreme weather events. We continuously evaluate the
potential impact of acute climate change on our business.
Our facilities, construction projects and operations are
interruption or
exposed
from
to potential
floods, strong winds,
(e.g.,
environmental disasters
wildfires, ice storms, earthquakes, tornados, cyclones). A
significant climate change event could disrupt our ability to
produce or sell power for an extended period. Therefore,
impacts with climate
future
we strive
adaptation solutions.
to mitigate
loss
For example, our gas facility at South Hedland, Australia, is
built with climate adaptation in mind. We designed the
facility to withstand a category 5 cyclone (the highest
cyclone rating). We have mitigated the risk of floods that
can occur in the area by constructing the facility above
normal flood levels. In 2019, a category 4 cyclone hit this
facility but did not impact operations. We were able to
continue generating electricity through the storm despite
widespread flooding and the shutdown of the nearby port.
In Canada, since the 2013 floods in Southern Alberta, we
have implemented projects that increase the resilience of
our hydro facilities to severe climate events. We have also
modified operations at several of our facilities as per an
agreement with the Government of Alberta. This reduces
flood risk in the spring while also recognizing the potential
for increased droughts as a result of climate change in the
future. TransAlta continues
in multi-
stakeholder groups developing options
for climate
resiliency across Southern Alberta.
to participate
For further information on weather-related risks, refer to
Weather in the Progressive Environmental Stewardship
section of this MD&A.
Chronic Physical Risks
investigate the physical
We continuously
impacts of
longer-term shifts in climate patterns on our operating
assets and actively integrate climate modelling into our
long-term planning. For example, changes to water flow or
wind patterns could impact our hydro and wind businesses
and associated revenue generation.
Climate Change Metrics and Targets
Metrics and Targets
climate
change management
At TransAlta,
and
performance are a top priority. We established our
climate-related goals and targets with reference to the UN
SDGs. Over time, we have set ourselves apart with actions
that demonstrate climate change leadership.
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Progress towards our climate-related targets are presented below. As a result of our Clean Electricity Growth Plan being
updated in November 2023, the below performance is assessed against our prior Clean Electricity Growth Plan
announced in 2021.
Clean energy growth
Sustainability
Target
Develop new renewable projects that support
our customers' sustainability goals to achieve
both long-term power price affordability and
carbon reductions.(1)
No further coal generation; 100 per cent of our
owned net generation capacity from renewables
and gas.
Target Year
2025
2025
Progress
Renewables Growth
Net Generation Capacity (renewable and gas)
Notes
UN SDG
Alignment
Since 2021, we have added over 800 MW of new
capacity through renewable projects such as
Windrise (206 MW), Garden Plain (130 MW),
Northern Goldfields Solar (48 MW), White Rock
(300 MW) and Horizon Hill (200 MW).
In
November 2023, our Clean Electricity Growth
Plan was updated to continue our priorities. By
2028, the plan will see the Company execute on
an incremental 1.75 GW of renewables growth
and a 10 GW growth pipeline.
In 2023, our owned net generation capacity from
renewables and gas represented approximately
90 per cent of our total 6,425 MW owned net
generation capacity. In 2021, we achieved full
phase-out of coal in Canada. In the US, the
remaining unit at Centralia is set to retire on
Dec. 31, 2025.
Target 7.2: "By 2030, increase substantially the
share of
the global
energy mix"
renewable energy
in
Target 7.1: "By 2030, ensure universal access to
affordable, reliable and modern energy services”.
(1) This includes the construction of new renewable projects (hydro, wind and solar) as part of the Company's Clean Electricity Growth Plan. This
excludes acquisitions.
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TransAlta Corporation 2023 Integrated Report
Emissions reduction
Sustainability
Target
By 2026, achieve a 75 per cent reduction of
scope 1 and 2 GHG emissions from a 2015
base year.
By 2045, achieve net-zero for 100 per cent of
TransAlta’s scope 1 and 2 GHG emissions.
Target Year
2026
2045
Progress
GHG Emissions Reduction
GHG Emission (million tonnes CO2e)
Notes
We are well on track to achieve our target of 75
per cent scope 1 and 2 GHG emissions reductions
by 2026. Since 2015, we have reduced scope 1
and 2 GHG emissions by 21.3 MT CO2e or
66 per cent.
In 2022, we adopted a more ambitious target to
be net-zero by 2045. We believe our Clean
Electricity Growth Plan supports achieving our
net-zero target.
UN SDG
Alignment
Target 13.2: "Integrate climate change measures
into national policies, strategies and planning".
Target 13.2: "Integrate climate change measures
into national policies, strategies and planning".
TransAlta's target to reduce 75 per cent of our scope 1 and
2 GHG emissions by 2026 from a 2015 base year is
estimated
sector
decarbonization pathway to limit global warming to 1.5°C,
as one of the Paris Agreement goals.
align with
electricity
the
to
In December 2021, the Company committed to setting a
science-based emissions reduction target through the
Science Based Target initiative ("SBTi"). In 2022, we
started the target validation process of our 2026 scope 1
and 2 emissions reduction target. In 2023, TransAlta did
not anticipate that setting a near-term scope 3 target
would be a condition to our scope 1 and 2 target being
validated by the SBTi. This would mean accelerating the
validation of our scope 3 emissions ahead of the
Company's intended timelines. As a result, given SBTi's
requirement that we establish a near-term scope 3
reduction target, we determined to withdraw from our
commitment to the SBTi. TransAlta remains confident that
our significant scope 1 and 2 emissions reduction trajectory
from 2015 to 2026 is in line with the electricity sector
pathway to limit global warming to 1.5°C.
GHG Disclosures
Scope 1 and 2 Emissions
Our scope 1 and 2 GHG emissions are calculated using a
number of different methodologies depending on the
technologies available at our facilities. Emissions data has
been aligned with the “Setting Organizational Boundaries:
Operational Control” methodology set out in the GHG
Protocol: A Corporate Accounting and Reporting Standard
developed by the World Resources Institute and the World
Business Council for Sustainable Development. We report
emissions on an operation control basis, which means we
report 100 per cent of emissions at the facilities that
we operate.
The GHG Protocol classifies a company’s scope 1
emissions as the direct emissions from owned or controlled
sources. Scope 2 emissions are indirect emissions from the
generation of purchased energy.
We compile our corporate GHG
inventory using our
business segment GHG calculations. As a result, emission
factors and global warming potentials used in our GHG
calculations can vary due to difference
in regional
compliance guidance. Applying harmonized global warming
potentials across our fleet would result in a minor variance
to our overall calculated GHG totals.
Our 2023 GHG data was reported to a number of different
regulatory bodies
regional
compliance and, as a result, may incur minor revisions as
we review and report data. Any historical revisions will be
captured and reported in future disclosure. As per the
throughout
the year
for
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Kyoto Protocol, GHGs include carbon dioxide, methane,
nitrous oxide, sulphur hexafluoride, nitrogen trifluoride,
hydrofluorocarbons and perfluorocarbons. Our exposure is
limited to carbon dioxide, methane, nitrous oxide and a
small amount of sulphur hexafluoride. The majority of our
estimated GHG emissions result from carbon dioxide
emissions from stationary combustion from coal and
natural-gas-powered generation. Methane emissions from
our operations are mainly due to incomplete combustion of
natural gas from the natural-gas-powered plants and there
are no fugitive methane emissions associated with our
operations. In 2023, methane emissions were 0.2 per cent
of our total emissions.
The following tables detail our GHG emissions by scope, business segment and country in million tonnes of CO2e. Some
values do not sum to the indicated total due to rounding of tabulated emissions. Zeros (0.0) indicate truncated values.
Year ended Dec. 31
Scope 1
Scope 2
Total scope 1 and 2 GHG emissions
Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Corporate and Energy Marketing
Total scope 1 and 2 GHG emissions
Year ended Dec. 31
Australia
Canada
US
Total scope 1 and 2 GHG emissions
In 2023, our GHG emissions (scopes 1 and 2) were 10.9
million tonnes as a result of normal operating activities.
Despite the increase in absolute emissions as a result of
increased production, our scope 1 and 2 GHG emissions
intensity remains similar to the previous year at 0.41
tCO2e/MWh (2022 - 0.40 tCO2e/MWh). TransAlta will
cease generation from our single remaining US coal unit
by the end of 2025, which will further reduce the
Company’s emissions.
TransAlta sells the environmental attributes generated
from our renewable energy facilities and does not subtract
this amount from our total GHG emissions (scope 1 and 2).
However, it should be noted that TransAlta’s customers are
reporting GHG emissions reductions using our renewable
energy assets, projects and operations.
2023
2022
2021
10.9
0.0
10.9
10.2
0.1
10.2
12.4
0.1
12.5
2023
2022
2021
0.0
0.0
6.4
4.5
0.0
0.0
0.0
6.3
4.0
0.0
0.0
0.0
6.5
6.0
0.0
10.9
10.2
12.5
2023
2022
2021
1.0
5.3
4.6
10.9
0.9
5.2
4.1
10.2
1.0
7.9
3.6
12.5
GHG emissions are verified to a level of reasonable
assurance in locations in which we operate within a carbon
regulatory framework. Any historical revisions to GHG data
will be captured and reported in future disclosure. The
majority of our GHG emissions result from carbon dioxide
emissions from stationary combustion from coal and
natural-gas-powered generation.
The following table highlights our scope 1 and 2 GHG
emissions
targeted
reductions since 2015 and our
emissions in 2026. The actual GHG emissions for the
Company in 2026 will vary from that presented below
depending on, among other things, the growth of the
Company, including its on-site generation business.
Year ended Dec. 31
2026 (forecast)
Total scope 1 and 2 GHG emissions (million tonnes CO2e)
8.1
2023
10.9
2015
32.2
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TransAlta Corporation 2023 Integrated Report
Scope 3 Emissions
Scope 3 emissions are all indirect emissions (not included
in scope 1 or 2) that occur in the value chain of the
including both upstream and
reporting company,
downstream emissions. TransAlta's scope 3 emissions are
calculated using methodologies consistent with the GHG
Protocol Corporate Value Chain (Scope 3) Accounting and
Reporting Standard
("Scope 3 Standard") and with
reference to the additional guidance provided in the GHG
Protocol Technical Guidance for Calculating Scope 3
Emissions ("Scope 3 Guidance") developed by the World
Resources Institute and the World Business Council for
Sustainable Development.
Our scope 3 emissions include the indirect GHG emissions
resulting from activities in our value chain but outside of
our operational control. We estimate our scope 3 emissions
in 2023 to be approximately four million tonnes of CO2e,
which is primarily attributed to our non-operated joint
venture interests as part of Category 15: Investments. Of
the 15 categories described in the GHG Protocol Scope 3
Guidance, four are not relevant to our business and,
therefore, are not included in the calculation: Category 8:
Upstream
12: End-of-life
treatment of sold products, Category 13: Downstream
leased assets, and Category 14: Franchises.
leased assets, Category
Since 2022, we have focused on enhancing our scope 3
emissions accounting. In 2022, we engaged with an
independent third-party consulting company to complete a
methodology review of our scope 3 inventory based on the
GHG Protocol Scope 3 Guidance. In 2023, we engaged
with an independent third-party advisory firm to complete
a pre-assessment of material scope 3 emissions so that we
can meet our target to verify and disclose 80 per cent of
TransAlta’s scope 3 emissions by 2024, with the aim of
reporting on 2023 scope 3 emissions as part of our 2024
Integrated Report.
Avoided Emissions
In 2023, production from renewable assets resulted in the
avoidance of approximately 2.3 million tonnes of CO2e for
our customers. TransAlta's avoided emissions are defined
as the sum of the displaced emissions by our renewable
assets in the jurisdictions where we operate. The value is
calculated as the product of the generation of electricity
obtained from a renewable source (hydro, wind and solar)
and the specific CO2 emissions intensity from the grid of
the jurisdiction in which we operate. Avoided emissions
decreased in 2023 compared to 2022 primarily due to the
reduction of emission intensity of the grid. As the world
decarbonizes over time, the emission intensity of the grid
will gradually decrease year over year. The following table
highlights our avoided emissions in the reporting year.
Year ended Dec. 31
Total GHG emissions avoided (million tonnes CO2e)
2023
2.3
2022
2.7
2021
2.6
Sustainable Finance
Sustainable finance is the process of taking due account of
ESG considerations (e.g., climate change, biodiversity,
human rights, etc.) when making investment decisions.
Sustainable finance is a key pillar of TransAlta’s Climate
Transition Plan. This means we will utilize pools of capital
available to sustainable economic activities and projects to
finance our energy transition towards net-zero operations.
TransAlta deploys green and sustainable financing to build
our renewable energy fleet and advance our clean energy
transition. This supports our goal to deliver on our
customers’ needs for clean electricity. Since 2020, we
have issued $684 million in green bonds and converted our
four-year $2.0 billion revolving credit facility
into a
sustainability-linked loan.
In 2022, TransAlta issued US$400 million ($533 million) in
Senior Green Bonds, an amount equal to the net proceeds
from the bonds has been allocated to finance or refinance
new and/or existing eligible green projects. The bonds
were issued under TransAlta's Green Bond Framework,
which aligns with the Green Bond Principles published by
the International Capital Market Association. For further
information, refer to Green Bond Framework
in the
Shareholder Information section of the Investor Centre on
our website. In 2021, the Company's indirect wholly owned
subsidiary, Windrise Wind LP, completed a secured green
bond offering by way of private placement
for
approximately $170 million (face value).
In 2021, TransAlta converted an existing $1.3 billion
syndicated revolving credit facility into a sustainability-
linked loan. The loan aligns the cost of borrowing to the
Company's GHG emissions reductions and gender diversity
targets. Sustainability-linked loans are any types of loan
instruments and/or contingent facilities (such as bonding
lines, guarantee lines or letters of credit) that incentivize
the borrower’s achievement of ambitious, predetermined
sustainability performance objectives.
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The summary below shows the carrying value of the issued green bonds and the total facility size of our ESG financial
operations portfolio.
As at Dec. 31 (in millions of Canadian dollars)
Green bonds (1)
Sustainability-linked loans
2023
684
1,950
2022
703
1,250
2021
171
1,250
(1) Green bonds are related to Senior Green Bonds issued in 2022 and the Windrise Wind green bond issued in 2021.
Climate-Related Financial Metrics
The results of TransAlta’s 2021 climate-related scenario
analysis, aligning with a 1.5°C warmer world, have shown
that opportunities to grow the renewable fleet exist across
all scenarios and locations. Our adjusted revenue from
renewable energy generation (hydro, wind and solar) in
2023 was $902 million (2022 – 1,014 million) or 27 per cent
of our total adjusted revenue in 2023.
We continue to execute the Clean Electricity Growth Plan
updated in 2023 to deliver up to 1.75 GW of incremental
renewables capacity and a 10 GW growth pipeline by 2028.
In 2023, our growth capital expenditures for renewable
energy generation was $630 million (2022 – $666 million).
In addition, TransAlta continues to invest in emerging
In 2023, our
abatement technologies and solutions.
investments in low-carbon research and development
were $4 million (2022 – $12 million).
As part of our Clean Electricity Growth Plan, our goal is to
achieve 70 per cent of adjusted EBITDA from renewables
and storage by the end of 2028. In 2023, adjusted EBITDA
from renewable energy generation was $716 million (2022
– $838 million) or 44 per cent of our total adjusted EBITDA.
Our renewable fleet makes our overall portfolio more
resilient
increased
incremental
flexibility
environmental value through environmental attributes. Our
revenue in 2023 from environmental attribute sales was
$36 million (2022 – $53 million).
to climate-related
in generation
risks, provides
creates
and
The disclosure of TransAlta's financial metrics related to
our climate-related risks and opportunities align with the
IFRS S2 and TCFD recommendations. A summary of our
climate-related financial metrics is presented below.
Year ended Dec. 31 (in millions of Canadian dollars)
Growth capital expenditures for renewable energy generation(1)
Renewable energy adjusted EBITDA(2)
Environmental attribute sales revenue(3)
Renewable energy adjusted revenue(4)
Investments in low-carbon research and development(5)
2022
2021
2023
630
716
36
666
838
53
902
1,014
4
12
326
584
40
731
—
(1) Growth capital expenditures include amounts deployed for growth projects and acquisitions related to renewable energy generation. This includes the
construction of our Windrise wind facility completed in 2021, the acquisition of North Carolina Solar portfolio in 2021, the construction of the Garden
Plain wind project, White Rock wind projects, Horizon Hill wind project and Northern Goldfields solar project as part of our Clean Electricity Growth Plan.
This excludes the Mount Keith transmission expansion project.
(2) Adjusted EBITDA from renewable energy generation includes hydro, wind, solar and battery storage facilities. The renewable energy adjusted EBITDA is
the total adjusted EBITDA of the Hydro and Wind and Solar segments. These items are not defined and have no standardized meaning under IFRS. Refer
to the Additional IFRS Measures and Non-IFRS Measures and Segmented Financial Performance and Operating Results sections of this MD&A.
(3) Environmental attribute sales revenue indicates the full amount of hydro, wind and solar environmental credits, without any other consolidation impacts.
(4) Adjusted revenue from renewable energy generation includes hydro, wind, solar and battery storage facilities. For details of the adjustments to revenues
included in adjusted EBITDA refer to the Additional IFRS and Non-IFRS Measures section of this MD&A
(5)
Investments in low-carbon research and development include our equity investment in Ekona Power Inc.'s ("Ekona") Series A funding round and our
four-year investment in EIP’s Deep Decarbonization Frontier Fund 1 (the “Frontier Fund”).
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TransAlta Corporation 2023 Integrated Report
Alignment with Climate-Related Disclosures Frameworks
The table below shows the alignment of our climate change management disclosure with TCFD, IFRS S2 and CDP
(2023) recommendations.
TCFD Recommended Disclosures
Other Alignments
Location
Governance
Describe the board’s oversight of
climate-related risks and opportunities
IFRS S2: 6; CDP: C1.1
Oversight
of Directors
by
the
Board
Describe management’s role in assessing
and managing climate-related risks
and opportunities
Strategy
Describe the climate-related risks and
opportunities the organization has identified
over the short, medium and long term
Describe the impact of climate-related risks
and opportunities on the organization’s
businesses, strategy and financial planning
Describe the resilience of the organization’s
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario
Risk management
Describe the organization’s processes for
identifying and assessing climate-related risks
IFRS S2: 6; CDP: C1.2
Role of Senior Management
IFRS S2: 8-9; CDP: C2.1
Key Scenario Findings
IFRS S2: 8-9; CDP: C2.3, C2.4,
C3.3, C3.4
Climate Change Strategy, Key
Climate Scenario Findings
IFRS S2: 22-23; CDP: C3.1, C3.2
Climate Scenarios, Key Climate
Scenario Findings
IFRS S2: 10; CDP: C2.2
Climate Change Strategy
Describe the organization’s processes for
managing climate-related risks
IFRS S2: 24-25; CDP: C2.2
IFRS S2: 24-25; CDP: C2.2
Managing Climate Change Risks
and Opportunities
Managing Climate Change Risks
and Opportunities
Describe how processes for identifying,
assessing and managing climate-related risks
are integrated into the organization’s overall
risk management
Metrics and targets
Disclose the metrics used by the organization
to assess climate-related risks and
opportunities in line with its strategy and risk
management process
Disclose scope 1, scope 2 and, if appropriate,
scope 3 greenhouse gas (GHG) emissions and
the related risks
Describe the targets used by the organization
to manage climate-related risks and
opportunities and performance against targets
IFRS S2: 27-28; CDP: C6.1, C6.3,
C6.5, C9.1
Climate Change Metrics and
Targets
IFRS S2: 29-32; CDP: C6.1, C6.3,
C6.5
Climate Change Metrics and
Targets
IFRS S2: 33-36; CDP: C4.1, C4.2
Climate Change Metrics and
Targets
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Enabling Innovation and Technology Adoption
long been
Technology and innovation are an existing and increasing
innovators.
focus at TransAlta. We have
TransAlta has been at the forefront of innovation in the
power-generation sector since the early 1900s when we
developed hydro assets. We have been an early adopter
and developer of wind technology in Canada, including the
first commercial wind farm in Canada, and are now one of
the largest wind generators in the country. In 2015, we
made our
in
Massachusetts, in 2020, we installed the first utility-scale
battery in Alberta and, in 2023 we completed our first solar
microgrid with battery energy storage system in Western
Australia. We are now
looking to advance a new
technology roadmap that aligns with the Clean Electricity
Growth Plan. This section covers manufactured and
intellectual capital management as per guidance from the
International Integrated Reporting Framework.
technology
investment
in solar
first
Our Energy Innovation Team
reliability,
transition:
As part of our Clean Electricity Growth Plan, in 2021, we
established an Energy Innovation team to investigate,
prioritize and deploy new net-zero electricity generation
technologies that address the three main factors of our
energy
and
affordability. As we grow our renewables business, the
Energy Innovation team is focused on what we should build
next that complements our hydro, wind and solar assets to
deliver reliable, affordable and low-carbon electricity to our
customers. At the same time, the Energy Innovation team
is looking at electrification broadly to investigate where
potential new, adjacent business opportunities may exist
for TransAlta.
decarbonization
Our Energy Innovation team participates in the Energy
Futures Lab, a multi-stakeholder initiative that brings
together innovators, influencers, and experts from different
sectors and perspectives to address the challenges and
opportunities of achieving a net-zero Alberta energy
system. In 2023, TransAlta sponsored the Energy Futures
Labs Alberta’s Electricity Futures Working Group, which
aims to foster collaboration to explore and test new
low-carbon
solutions
electricity system
to
participate in the energy innovation ecosystem through
engagement with various innovation accelerators that
'incubate' and accelerate start-ups by matching new
technology solutions with practical problems identified by
end-users, like TransAlta.
for a reliable, affordable, and
in Alberta. We also continue
In 2023, TransAlta launched its Energy Innovation Series.
The Series is led by our Energy Innovation Team along with
guest speakers from across the Company and aims to
empower our workforce
industry
knowledge on innovation in the electricity sector. In 2023,
we delivered four sessions on a range of relevant topics
relevant
through
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TransAlta Corporation 2023 Integrated Report
including grid reliability during the energy transition, grid
energy storage options and decarbonized baseload
generation strategies.
For further details on how we invest in our workforce,
please refer to Talent and Employee Development in the
Building a Diverse and Inclusive Workforce section of
this MD&A.
Renewable Energy
In 2023, TransAlta's nameplate capacity was 944 MW from
hydro energy, 2,046 MW from wind and battery storage,
and 181 MW from solar power. We continue to look for
opportunities to develop and operate solar energy.
In August 2023, the Garden Plain wind facility in Alberta
was commissioned adding 130 MW to our gross installed
capacity. The facility is fully contracted with Pembina
Pipeline Corporation (100 MW) and PepsiCo Canada (30
MW), with a weighted average contract
life of
approximately 17 years.
In November 2023, the 48 MW Northern Goldfields solar
and battery storage facilities in Western Australia achieved
commercial operation. The facilities consist of the 27 MW
Mount Keith solar facility, 11 MW Leinster solar farm and 10
MW/5 MWh Leinster battery energy storage system and
interconnecting transmission infrastructure, all of which are
now integrated into TransAlta’s 169 MW Southern Cross
Energy North remote network. The Northern Goldfields
solar facilities are expected to reduce BHP Nickel West’s
scope 2 electricity GHG emissions from its Leinster and
Mount Keith operations by 12 per cent and is long-term
contracted with a globally recognized counterparty for
16 years.
In 2023, the Company continued to advance the 300 MW
White Rock wind projects, to be located in Oklahoma. The
White Rock wind projects are expected to achieve
commercial operation in the first quarter of 2024. In 2021,
we entered into two long-term PPAs with Amazon for the
offtake of 100 per cent of
from
these projects.
the generation
In 2022, the Company executed a
In 2023, TransAlta advanced the construction of its 200
MW Horizon Hill wind project located in Oklahoma, with a
target commercial operation date in the first quarter of
2024.
long-term
renewable energy PPA with a subsidiary of Meta for 100
per cent of the generation from the project. Under this
agreement, Meta will receive both renewable electricity
and environmental attributes
the Horizon Hill
wind project.
from
TransAlta is actively advancing its development pipeline for
renewable energy generation. In 2023, the Company
established a pipeline of potential growth projects in
renewables that includes 280 MW of advanced-stage
development projects along with 4,285 to 5,015 MW of
projects in earlier stages of development.
Scaling Up Energy Solutions
Battery Storage
We continue to invest in battery energy storage systems
and see them as an important element for TransAlta to
continue
the energy
reliability
transition – continuing an important role TransAlta has
played for over one hundred years with our hydro units.
to provide
through
In November 2023, the Northern Goldfields solar and
battery storage facilities in Western Australia achieved
commercial operation and are now supplying reliable
electricity to BHP’s remote nickel mining operations in
Western Australia. The energy storage consists of the 10
MW/5 MWh Leinster Battery Energy Storage System which
will be integrated into TransAlta’s remote network. The
network and new generation will support BHP Nickel West
to meet its emissions reduction targets and deliver lower-
carbon nickel to its customers. TransAlta is continuing to
work with BHP Nickel West on the development of other
projects to further reduce scope 2 GHG emissions at BHP’s
Mt Keith and Leinster operations.
In 2023, TransAlta’s development pipeline included four
energy storage projects in Canada: WaterCharger (lithium-
ion battery storage, 180 MW), Tent Mountain (pumped
hydro storage, 160 MW), Brazeau (pumped hydro storage,
300-900 MW) and New Brunswick Power Battery (battery,
10 MW). These strategically-located units could play
including providing
various roles on electricity grids
reliability services and storing surplus generation for
discharge at peak periods.
Electric Mobility
Companies can play an important role in driving the
transition to electric vehicles by taking the lead in their
own operations. Recognizing this role, TransAlta
is
exploring the potential of electrifying our service fleet with
zero-emission vehicles. In 2023, we launched a pilot
project called Project Electrify to test four fully-electric
vehicles at different facilities in Canada. We will assess
their performance, safety and cost-effectiveness under
different conditions and operator needs. The project will
run from 2024 to 2025, during which time our operators
will gain hands-on experience with the technology and
provide feedback on its suitability for wider adoption.
Based on the learnings from the project, TransAlta will
decide whether to pursue further electrification of our fleet.
Future Solutions
Hydrogen
In 2022, we announced a $2 million equity investment in
Ekona's Series A funding round. The investment will help
support the commercialization of Ekona’s novel methane
pyrolysis technology platform, which produces cleaner and
If successful, Ekona’s
lower-cost turquoise hydrogen.
distributed technology allows for onsite production of
hydrogen, hence avoiding
for costly
transportation of hydrogen. Furthermore, its solid carbon
byproduct allows for low-cost, low-emissions hydrogen
production without the need for carbon sequestration.
TransAlta is a member of Ekona’s Strategic Committee and
continues
its
pyrolysis technology.
to work with Ekona as
it develops
the need
Small Modular Reactors ("SMR")
Small modular reactors have a power capacity of up to 300
MW per unit and differ from traditional nuclear in that they
are built to be modular, factory-assembled units that are
transported to a location for installation. Additionally, they
implement passive or walk-away safety features designed
to dramatically reduce the risk of nuclear events. While
high costs remain a challenge for all forms of nuclear, SMR
developers argue that smaller MW plants made from
manufactured components will allow the industry to access
steep cost declines as the technology matures and more
units are deployed. By providing reliable, emissions-free
baseload power, nuclear power may play an important role
in clean energy transitions. Today, nuclear power makes a
significant contribution to low-carbon electricity generation
and has significant potential to contribute to power sector
to monitor
decarbonization.
developments in SMR.
continues
TransAlta
Nature-based Solutions ("NBS")
Nature-based solutions are actions to protect, sustainably
manage and restore natural and modified ecosystems that
address societal challenges effectively and adaptively,
simultaneously benefiting people and nature. TransAlta is
actively evaluating NBS as carbon removals to neutralize
any residual emissions that we cannot yet eliminate.
Direct Air Capture ("DAC")
Direct air capture technologies extract CO2 directly from
the atmosphere. The CO2 can be permanently stored in
deep geological formations, thereby achieving permanent
CO2 removal. TransAlta continues to explore the benefits
of DAC as a carbon dioxide removal option to support the
net-zero transition of our operations and customers.
Carbon Capture, Utilization and
Storage ("CCUS")
Our teams continuously explore the use of applied or new
technologies such as CCUS to reduce GHG emissions. We
TransAlta Corporation 2023 Integrated Report
M95
know that new technologies will emerge over the next
number of years as the industry continues to drive towards
lower emissions while maintaining a reliable and affordable
product for customers.
Disruptive Technologies
in Energy
In 2022, we entered into a commitment to invest US$25
Impact
million over the next four years
Partners' ("EIP") Deep Decarbonization Frontier Fund 1 (the
“Frontier Fund”) that invests in early-stage, innovative
technology companies that will accelerate the transition to
net-zero GHG emissions. TransAlta's investment in the
Frontier Fund provides TransAlta with the opportunity to
pool funds with some of the largest utilities in the United
States and Europe to identify, pilot, commercialize and
its
bring
decarbonization goals.
that will support
technologies
to market
Fusion
Fusion technologies attempt to recreate the fusion
reactions in the sun by fusing two hydrogen molecules
together. If successful, fusion promises low-cost energy,
with far shorter-lived nuclear waste. Fusion achieved some
significant development milestones in 2022, including most
significantly, Lawrence Livermore National Laboratory
achieving net energy gain. This, coupled with
unprecedented capital flow into fusion companies, has led
to newfound excitement that fusion may be able to
leapfrog current generation technologies.
Through EIP, TransAlta has invested in ZAP Energy, a
leading fusion start-up. ZAP Energy’s technology stabilizes
the hydrogen plasma using sheared flow (driving current
through the flow creating the magnetic field confining and
compressing the plasma) rather than magnetic fields. In
2022, ZAP announced it will conduct a feasibility study of
retrofitting the former TransAlta Big Hanaford gas plant
located in Centralia to host its first-of-a-kind Z-pinch
fusion pilot plant. ZAP received $1 million from the
Centralia Coal Transition Grants Energy Technology Board
as part of our energy transition investments to move away
from coal in Washington State.
information on
For more
low-carbon
research and development, refer to Climate-Related
Financial Metrics section of this MD&A.
investments
in
Analytics and Automation
Asset Performance
TransAlta's Asset Performance team was founded in 2023
to continue the work initiated by our previous Asset
Analytics and Optimization team founded in 2008. This
team monitors the Company's generation portfolio across
Canada, the US and Australia. A centralized team of
engineers and operations specialists remotely monitors our
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TransAlta Corporation 2023 Integrated Report
power facilities for emerging equipment reliability and
performance issues. The Asset Performance team also
performs production reporting functions for these assets
improve
and
this reporting.
is actively engaged
in projects
to
to advance
The Data and Innovation team worked with partners across
the company
its Asset Performance
Management platform, GenOS, to deliver new features that
increase
the performance and management of our
renewable asset fleet. Key process improvements, such as
enhanced performance analytics that leverage machine
learning, advanced analytics and data science models,
provide our operators with deeper insights to help optimize
asset performance across the entire fleet. Built in-house,
GenOS provides data-driven insights for our wind, solar,
gas and hydro fleets
Asset Performance staff are trained in the development
and use of specialized equipment monitoring and
performance assessment software and they apply their
experience to power facility operations. If an issue is
detected, the Asset Performance engineer will initially
assess and then notify facility operations of their findings
to support investigation and remedy of the issue before
there is an impact to operations. This support is critical for
reliability and performance of our operations. For example,
if a wind turbine starts to show very early signs of
equipment change compared to others, our operation team
is notified and will work to investigate and remedy the
issue. The monitoring, analysis and diagnostics completed
by the Asset Performance engineer are focused on
early
issues based on
longer-term trend analysis and complements day-to-day
facility operations.
identification of equipment
Automation and Robotics
TransAlta created the Data and Innovation team in 2019 to
modernize its data infrastructure and take advantage of
new opportunities in analytics and data science. The Data
and Innovation team is cross-functional; composed of data
architects, data engineers, data analysts, software
developers, integration specialists and engineers. The
team focuses on the delivery of value using digital
innovation, such as the modernization of data management
strategy and platforms, the rapid delivery of data-driven
applications, the design and implementation of advanced
analytics and machine learning models and the execution
of robotic process automation to eliminate manual tasks.
The substantial growth of our Advanced Automation
Program has increased the number of manual processes
we have automated, allowing our subject matter experts to
spend more time on higher-value opportunities. With
is able to
industry
leverage
quickly
develop custom robotic process automations across
the company.
in automation, TransAlta
leaders
high
technology
impact
to
Drones
In 2022, TransAlta formed the Robotics Inspection Council.
The Council's purpose is to coordinate and assess the use
of drones for robotic inspections to increase value to the
business through improved safety, reduced inspection
costs and better communication.
In alignment with
TransAlta’s core value of safety, the Council defined the
corporate requirements on the safe use of remotely piloted
aircraft in TransAlta's fleet. In 2023, drone technology was
used in TransAlta's gas and hydro fleets to inspect boiler
internal components, canals and cooling ponds, and a
“drone in a box” solution was trialed and purchased for
improved site security. The Council continues to meet with
vendors and
industry peers to understand areas of
opportunity and how these technologies are being
in
inspections were performed
deployed. Robotic
TransAlta’s gas and hydro
is
fleets. The Council
investigating additional applications in our fleet for 2024.
Engaging with Our Stakeholders to Create
Positive Relationships
We strive to create shared value for our stakeholders
through social and relationship value creation at TransAlta.
The most material impacts on our social and relationship
performance are fostering positive relationships with
Indigenous
stakeholders,
governments, industry and landowners in the areas where
we operate, as well as public health and safety. This
section covers sustainability
factors of social and
relationship capital and intellectual capital as per guidance
from the International Integrated Reporting Framework.
communities,
neighbours,
Inclusive Transition
In support of our energy transition, since 2015, TransAlta
has been investing US$55 million over 10 years to support
energy efficiency, economic and community development
and education and retraining initiatives in Washington
State. The investment is part of the TransAlta Energy
Transition Bill passed in 2011. This bill was a historic
agreement between policymakers, environmentalists,
labour leaders and TransAlta to transition away from coal in
Washington State by closing the Centralia facility’s two
units, one in 2020 and the other in 2025. Three funding
boards were formed to invest the US$55 million: the
Weatherization Board (US$10 million), the Economic and
Community Development Board (US$20 million), and the
Energy Technology Board (US$25 million). To date, the
Weatherization Board has invested US$9.5 million, the
Economic and Community Development Board US$15
million and the Energy Technology Board US$15 million.
Specific projects that the boards funded in 2023 include:
the replacement of a diesel bus with a new electric bus by
the Skamania School District; the installation of a 100 kW
roof mounted solar system at Palouse High School by the
Palouse School District; the installation of a 100kW ground
mounted solar system at the Wastewater Treatment Plant
owned by the City of Medical Lake; and pre-employment
training services
in Lewis County by
Morningside Services.
for youth
Additionally, in 2016, TransAlta announced that we had
reached an agreement with the Government of Alberta for
the cessation of emissions from coal-fired electricity
generation facilities in Alberta (Off-Coal Agreement). As
part of the Off-Coal Agreement, TransAlta has invested in
initiatives to support the communities
programs and
surrounding the plants negatively impacted by the phase-
out of coal generation during the transition.
Customers
TransAlta serves industrial and commercial customers with
power and energy services across its fleet in Canada, the
US and Australia. We are focused on customer-centred
renewables growth to bring high levels of service quality
and reliability for our customers in a low-carbon future. As
one of the largest electricity generators in Canada, our
team serves businesses with:
• Energy solutions starting from the design phase;
• Energy consumption and cost management solutions;
• Market price risk and volume exposure mitigation; and
• Monitoring of energy market design changes, price
signals and applicable and available incentives.
The Customer Solutions team at TransAlta has maintained
a large portfolio of customers in Alberta across a broad
range of industry segments, including commercial real
estate, municipal, manufacturing, industrial, hospitality,
finance and oil and gas. Our work has been recognized by
our customers through an average retention rate of 89 per
cent over the last three years.
Across our business in Canada, the US and Australia, we
provide on-site generation for large mining and industrial
customers. This requires us to continually engage with
that current electricity
these customers, ensuring
requirements are provided safely, reliably and cost-
effectively with the benefit of lower GHG emissions. We
to provide 24/7
continue
their
carbon-free energy
decarbonization goals.
to help customers meet
to explore opportunities
TransAlta Corporation 2023 Integrated Report
M97
We continue to develop renewable energy facilities to
support customers achieving their sustainability goals and
targets, such as 100 per cent renewable power targets
and/or GHG emissions reduction targets. Production
from renewable electricity
in the
avoidance of approximately 2.3 million tonnes of CO2e for
our customers.
in 2023 resulted
Our experience in developing and operating power facilities is highlighted below:
Power generation type
Operating experience (years)
Hydro
Natural Gas
Wind
Solar
Battery Energy Storage Systems
112
73
26
9
3
For further details on how we support our customers' sustainability objectives, please refer to the Enabling Innovation and
Technology Adoption section of this MD&A.
Human Rights
rights of all
is committed to honouring domestic and
TransAlta
internationally accepted labour standards and supports the
protection of human
its employees,
contractors, suppliers, partners, Indigenous partners and
other stakeholders. We abide by human rights and modern
slavery legislation in Canada, the US and Australia. We
have a zero tolerance approach to discrimination based on
age, disability, gender, race, religion, colour, national origin,
political affiliation or veteran’s status or any other
prohibited ground as defined by human rights legislation in
the jurisdictions in which we operate. We afford equal
opportunities for all gender identities, support the right to
freedom of association and the right to organize unions
and bargain collectively. We do not conduct operational
human rights reviews or impact assessments, but we have
governance practices
in place for the protection of
human rights.
Our Human Rights and Discrimination Policy outlines our
commitment to human rights in our operations and supply
chain to ensure that our personnel policies and practices in
our global operations respect fundamental rights. Expected
behaviours of all our employees are set out in our
Corporate Code of Conduct. We are committed to creating
a work environment where all workers feel safe and are
valued for the diversity they bring to our business. Our
annual mandatory Code of Conduct training is required for
employees prior to signing off the Code of Conduct. In
2023, 100 per cent of employees completed the training
and acknowledged and signed the Code of Conduct. We
also have adopted a Supplier Code of Conduct that defines
the principles and standards expected of suppliers, their
employees and contractors to meet while providing goods
and/or services to TransAlta.
Our Whistleblower Policy provides a mechanism for our
employees, officers, directors and contractors to report,
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TransAlta Corporation 2023 Integrated Report
among other things, any actual or suspected ethical or
legal violations. We would seek
the
impact promptly in order to establish a corrective action
plan
individuals
and stakeholders.
in collaboration with
relevant
remedy
the
to
In Australia, since 2020, we have reported under federal
modern slavery
legislation. Our Modern Slavery Act
Statements demonstrate the actions we have taken to
assess and address modern slavery risks within our
operations and supply chain. These annual statements are
approved by our Board of Directors and are publicly
available. In 2024, we will report under Canada’s Fighting
Against Forced Labour and Child Labour
in Supply
Chains Act.
Supply Chain and Sustainable Sourcing
We continue to seek solutions to advance supply chain
sustainability. As we explore major projects, we assess
vendors both at the evaluation stage and as part of
information requests on such elements as safe work
practices, environmental practices and Indigenous spend.
This means, for example and for select procurement
engagements, getting information on:
• Estimated value of services that will be procured though
local Indigenous businesses;
• Estimated number of local Indigenous persons that will
be employed;
• Understanding
overall
community
spend
and
engagement; and
• Understanding the state of community relations through
interview processes and stakeholder work.
Supply chain is a pillar of our Clean Electricity Growth Plan
to deliver net-zero operations. We have enhanced the
supplier management functionality within our corporate
procurement system and are working to incorporate ESG
data reporting capability. In the next few years, we will
develop ESG criteria for supply chain engagement and
work to understand our direct suppliers' GHG emissions
profile and targets. Our long-term plan is to engage with
suppliers to explore enhancement of their GHG emissions
targets and set direction for engaging suppliers with GHG
emissions reduction targets.
In 2022, TransAlta approved a new goal to integrate
sustainability into supply chain. Our target is "By 2024, 80
per cent of our spend will be with suppliers that have a
sustainability policy or commitment". This supports the
intent of the UN SDG Target 12.7: “Promote public
procurement practices that are sustainable, in accordance
with national policies and priorities.” In 2023, we confirmed
that on average 78 per cent of our spend in 2022 and
2023 was with suppliers that have a sustainability policy or
commitment. TransAlta will continue to consider other
targets to help integrate sustainability into supply chain.
Our Supplier Code of Conduct applies to all vendors and
suppliers of TransAlta. Under this code, suppliers of goods
and services to TransAlta are required to adhere to our
core values, including health and safety, ethical business
conduct and environmental leadership. The code also
allows suppliers to report ethical or legal concerns via
TransAlta’s Ethics Helpline.
Indigenous Relationships and Partnerships
to
Indigenous neighbours, aspiring
At TransAlta, we value relationships and partnerships with
our
the highest
standards in our relationships with Indigenous peoples. Our
core values of safety, innovation, sustainability, respect
and integrity represent how we do business and engage
with Indigenous peoples. Our commitment to Indigenous
relations is led by a centralized corporate team who foster
a relationship-based approach, involving employees at our
facilities and within each business unit. These employees
and teams build relationships with the neighbouring
Indigenous communities and work to develop respectful,
trusting relationships that help TransAlta continually
improve its business practices.
Our Indigenous Relations Policy focuses on five key areas:
community engagement and consultation, business
development, community investment, employment, and
training and awareness. We ensure that TransAlta’s
principles for engagement are upheld and the Company
fulfils its commitments to Indigenous communities. Efforts
are focused on building and maintaining solid relationships
and strong communication channels that enable TransAlta
to: share information regarding operations and growth
initiatives; gather feedback to inform project planning; and
understand priorities and interests from communities to
better address concerns and unlock opportunities.
Methods of engagement include:
• Relationship building through regular communication and
meetings with representatives at various levels within
Indigenous communities and organizations;
• Hosting company-community activities to share both
business information and cultural knowledge;
• Maintaining consistent communications with each
following appropriate community
community and
protocols and procedures;
• Participating in community events such as pow wows and
blessing ceremonies; and
• Providing both monetary and in-kind sponsorships for
community initiatives.
TransAlta takes a proactive approach in engagement by
initiating communication early in project development to
allow concerns to be identified and addressed, which has
minimized potential project delays. We strive to maintain
relationships through the life cycle of our facilities, from
project development and construction, through operation,
until decommissioning phases are complete. We work with
communities to build relationships based on a foundation
of ongoing communication and mutual respect. This is
recognized in our Indigenous Relations Policy, which was
recently updated to include our acknowledgement and
understanding of the intent of the recommendations of
the United Nations Declaration on
the Rights of
Indigenous Peoples.
In 2024, TransAlta will continue to ensure that all new
employees complete
Indigenous cultural awareness
training as part of the Company’s onboarding process.
Support for Indigenous Youth, Education
and Employment
investing
importance of
TransAlta recognizes the
in
Indigenous students and our financial support helps
students complete their education, become self-sufficient
and move forward to become future leaders in their
communities. We are keen to help young Indigenous
students reach their full potential and achieve their
dreams. We also believe in providing support to Indigenous
primary school students, helping to instill a passion for
lifelong learning.
In 2023, TransAlta provided more than $453,000 to
support Indigenous youth, education and employment
programs, representing 14 per cent of TransAlta’s total
community investment. Highlights include:
• Mother Earth's Children's Charter School ("MECCS") –
Located in Treaty 6 territory, Alberta, MECCS offers
education for students from kindergarten to Grade 9 and
is cited as Canada’s first and only Indigenous children’s
charter school. The student population is diverse and
includes Métis, Cree, Nakoda Sioux and Stoney. MECCS
is a tuition-free public school integrating Indigenous
TransAlta Corporation 2023 Integrated Report
M99
Our Stakeholders
To act in the best interests of the Company and optimize
the balance between financial, environmental and social
values of our stakeholders and TransAlta, we seek to:
• Build relationships through regular engagement with
stakeholders regarding our operations, growth prospects
and future developments;
• Consider feedback and make changes to project designs
and plans to resolve and/or accommodate concerns
expressed by our stakeholders; and
• Respond
in a timely and professional manner to
stakeholder inquiries and concerns and work diligently to
resolve issues or complaints.
identified
Our stakeholders are
through stakeholder
mapping exercises and prospective project development or
acquisition. Through decades of establishing stakeholder
relationships in the areas of our facilities, we have
developed a strong knowledge of who our stakeholders
are and have gained understanding of our stakeholders'
issues and concerns.
Our principal stakeholder groups are
following table.
listed
in
the
culture, beliefs and perspectives into elementary school
experience. The school specializes
in working with
children suffering from adversity and provides enhanced
learning support. MECCS students have a high success
rate for completing high school and winning academic
awards. In 2023, TransAlta provided $35,000 to support
the school’s operations plus a holiday donation to enable
a student celebration.
• The Read On Literacy Program ("Read On") – In 2023,
TransAlta partnered with Read On to provide elementary
students in communities near our operations with in-
person and virtual sessions. Read On is an Indigenous
literacy program that seeks to mentor young people in
First Nation schools to achieve their maximum academic,
personal and social development by promoting the core
values of education, literacy, taking pride in ones’ culture
and making good decisions in one’s life.
• Diamond Willow Youth Lodge – In partnership with the
United Way of Calgary and Area, designated funding was
provided to the Diamond Willow Youth Lodge, which is a
safe place for Calgary Indigenous youth to connect
with peers and participate in a variety of programs that
promote
and
and wellness,
employment preparation.
education
health
• Wihnemne School Hot Lunch Program –
In 2023,
TransAlta partnered with the community school at Paul
First Nation in Alberta on a program designed to ensure
the Nation’s children receive nutritious meals each day
maximizing their scholastic success. This program is
cited as a catalyst responsible for strong growth in the
school's enrollment.
Indigenous Cultural Awareness Training for
TransAlta Employees
In November 2023, TransAlta successfully reached 100 per
cent completion of the Indigenous Cultural Awareness
Training program across our operating jurisdictions in
Canada, the US and Australia. In line with our sustainability
target set in 2021, the Company made a deliberate effort
to ensure that every employee participated in Indigenous
Cultural Awareness training over the past two years. This
initiative has been instrumental in providing valuable
insights into the rich history, culture and perspectives of
Indigenous communities within the jurisdictions where
we operate.
Stakeholder Relationships
Fostering positive relationships with our stakeholders is
important to TransAlta. Driven by our core values, we see
stakeholder transparency as an
integral part of our
relationships. We take a proactive approach to building
relationships and understanding the impacts our business
and operations may have on local stakeholders.
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TransAlta Corporation 2023 Integrated Report
TransAlta stakeholders
Non-governmental organizations
Community associations
Transmission facility operators
Regulators
Industry organizations
Communities
Charitable organizations/Non-profit
Standards organizations
Retirees
All levels of government
Media
Suppliers
Contractors
Business partners
Unions/Labour organizations
Financial institutions
Residents/Landowners
Investor organizations
Government agencies
Forest associations/Industry
Mineral rights owners
System operators
Oil and gas associations/Industry
Railroad owners
Customers
Shareholders
Think tanks
Academics
Utility owners
Employees
Stakeholder Engagement
In order to run our business successfully, we maintain open
communication channels with our stakeholders. We are
committed to timely and professional resolution in our
dialogue with stakeholders.
requirements,
Our stakeholder engagement practices are guided by
regulatory
practices,
international standards and corporate policies. We work
internally and externally with each stakeholder to identify
and mitigate further issues.
industry
best
Examples of our methods of engagement are listed in the following table.
Information and communication
Dialogue and consultation
Relationship building
Open houses, town halls and public
information sessions
In-person meetings with local groups
and communities
Community advisory bodies
Newsletters, telephone conversations,
emails and letters
Meetings with individual stakeholders
(e.g., landowners and residents)
Capacity agreements
Websites
Targeted audience sessions
Sponsorships and donations
Social media postings
Tours of our facilities and sites
Hosting and attending events
A key focus of our work is to support business growth
through proactive engagement with stakeholders in our
geographic operating areas
in Canada, the US and
Australia to develop and maintain relationships, assess
needs and fit and seek out collaborative opportunities. This
helps ensure any stakeholder concerns are identified and
can be addressed early in the development process,
conduct
thereby minimizing project delays. We
consultation primarily during project development and
construction phase and maintain engaged communication
throughout operations to decommissioning phase.
Examples of stakeholder engagement in 2023 include: the
Pinnacle project 1 and 2 open houses, SunHills Solar
project open house, two Riplinger project open houses and
ongoing engagement on the Kent Hills rehabilitation plan.
Community Investments
In 2023, TransAlta contributed approximately $3.2 million
in donations and sponsorships (2022 – $2.3 million), with a
in three priority areas: youth and
continued focus
education, environmental leadership and community health
and wellness.
One of our significant community investments each year is
to United Way campaigns across Canada and the US. This
year, TransAlta employees, retirees, contractors and the
Company raised over $1.5 million for the United Way.
In 2023, TransAlta made a number of other significant
investments, including the following highlights:
• Community Shelters –
In 2023, TransAlta donated
$40,000 to local shelters near our operating assets in
Canada, US and Australia. This initiative recognizes the
unprecedented need for employment services, families
experiencing poverty and escaping violence and abuse.
• New Operation Support – In 2023, TransAlta donated
$50,000 to local communities surrounding our new White
Rock, Horizon Hill and Garden Plain operations. These
initiatives recognize our commitment to supporting the
communities
in which we operate. Funding was
designated to the local school libraries, school repairs
and a local fire station.
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• Centralia Coal Facility – Since 2012, TransAlta has
maintained its commitment to invest US$55 million in the
state of Washington and made the final annual payment
in December 2023. Funds from this investment have
been managed by the Centralia Coal Transition Board to
support
including
investments in the arts, colleges, energy technology,
weatherization upgrades and supporting displaced
workers with education and retraining opportunities. This
completes a significant commitment for the transition of
the Centralia coal facility.
sponsorships
community
local
improvement and familiarity with our assets and builds
strong communication channels for emergency response.
Our processes designate how we communicate with
stakeholders in the event of a crisis. This is managed by
our Crisis Communications Team. The team has the
responsibility and goal to provide a unified message on
behalf of the Company throughout the response and
recovery, ensure all messaging is approved by the Incident
Commander,
any
co-ordinate messaging
applicable external agencies and, if necessary, deploy to
an incident site.
with
Public Health and Safety
We are committed to protecting the public and our assets,
as well as the physical, psychological and social well-being
of our employees.
We specifically look to minimize the following risks:
• Harm to people;
• Damage to property;
• Operational liability; and
• Loss of organizational reputation and integrity.
We work to prevent incidents and lower our risk by
administering security controls such as restricting physical
access around and into our operating facilities. The use of
security technology such as surveillance cameras and
electronic access is utilized to ensure the control of secure
areas. Regular audits and security risk assessments are
conducted to ensure continuous improvement of the
Security Management Program. Our Security Management
Program is focused on the protection of people, property,
information and reputation.
The Corporate Emergency Management Program prepares
employees should an emergency incident occur. The
program receives executive sponsorship and includes an
emergency management policy and standard, which sets
an expectation for employees to continuously prepare for
emergencies. It provides the overarching framework for
each business unit to provide an Emergency Response
Plan and Business Continuity Plan. We implement our
Incident Command System, which is a standardized on-
scene emergency and incident management system that
provides an organizational structure capable of responding
to single or multiple incidents. Designed to aid in the
management of resources during incidents, it combines
facilities,
and
communications operating within a common organizational
structure. It is used as part of an all-hazards approach for
incident management and is officially recognized for
multi-agency
situations,
in
however complex the incident might be.
procedures
emergency
equipment,
personnel,
response
We develop strong relationships with local emergency
responders. We periodically conduct multi-agency training
facilities. This ensures continuous
events at our
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Annual training, exercise and drill requirements are
adhered to by our employees operating at our facilities.
The results are tracked, audited and presented at our
annual
and
in maintaining an effective
recommendations assist
program across the organization.
executive
findings
review.
The
Data and Digital Asset Protection
that compromise
We work diligently to protect our digital assets, including
our corporate data and our digital identities that provide
access into line of business applications. Cybersecurity
threats
the
integrity, system and network
manipulation of data
hacking, use of social engineering tactics through email
phishing and compromise of operations and infrastructure
through the use of ransomware, credential breaches and
attacks introduced through unknowing third-party vendors
and service providers.
these assets
include
Given the ever-evolving nature of cyberattacks, we are
consistently adapting our cybersecurity program to focus
on three key pillars: technology, processes and people.
Each of these pillars can be reinforced independently to
address specific cybersecurity risks and threats through a
comprehensive and multi-faceted program. TransAlta
continually assesses our cyber threat level, implementing
measures and controls to proactively mitigate internal and
external cybersecurity
to
the organization.
threats posed
risks and
TransAlta’s Cybersecurity Policy defines how we identify
and manage cybersecurity risks and threats, as well as
how we detect, respond, and recover from cybersecurity
incidents. We comply with the North American Electric
Reliability Corporation Critical
Infrastructure Protection
("NERC CIP") requirements where applicable. The NERC
CIP is a set of standards aimed at regulating, enforcing,
monitoring and managing the security of the North
American power system. These compliance standards
apply specifically to address cybersecurity risks.
In 2023, there were no identified cybersecurity breaches
to our technology environment. Refer to Cybersecurity Risk
in the Governance and Risk Management section of this
MD&A for further details.
Building a Diverse and Inclusive Workforce
Engaging our workforce, developing our employees,
inclusive work
creating an equitable, diverse and
environment and minimizing safety incidents are the keys
to human capital value creation at TransAlta and our most
material areas for management. In 2023, we enhanced our
ESG performance through our efforts to promote an
equitable, diverse and inclusive workforce. This section
covers sustainability factors of human capital as per
guidance
Integrated
Reporting Framework.
International
from
the
Equity, Diversity and Inclusion
TransAlta’s commitment and focus on excellence in equity,
diversity and inclusion ("ED&I") is found in our workplace
and among our co-workers who advocate for the values of
equity and inclusion at all working levels. This commitment
is outlined in our Board and Workforce Diversity Policy and
Diversity and Inclusion Pledge. We believe a strong focus
on ED&I will create a culture of belonging, allowing our
employees to bring their authentic selves to work where
they can thrive, innovate, improve service to our customers
and positively impact the communities that we live in.
In 2023, TransAlta executed the third year of our five-year
ED&I strategy to achieve the goals and aspirations defined
in our ED&I Pledge.
Gender Diversity
A number of case studies have highlighted the link
between gender diversity and additional business value.
TransAlta is an active supporter of gender diversity as a
driver for value, but also as an ethical business practice.
Our commitment to gender diversity in our business is
evidenced by our female participation rates on both our
executive team and Board. As of Dec. 31, 2023, women
made up 26 per cent of our executive team and 46 per
cent of our Board. These percentages are higher than the
Canadian corporate averages of board seats held by
women (29 per cent) and women on executive teams (21
per cent), according to data from all disclosing Canadian
TSX-listed companies in Canada.
To further support female advancement, we have set
targets to: (i) maintain equal pay for women in equivalent
roles, (ii) achieve 50 per cent representation of women on
our Board by 2030 and (iii) achieve 40 per cent
representation of women among all employees by 2030.
Currently, women employees represent 27 per cent of all
employees. Though the majority of our operational roles
are currently held by male employees, we remain
committed to achieving the 40 per cent goal in this
time period.
In 2023, we continued with the Women
in Trades
Scholarship that provides eligible students enrolled in post-
secondary trade programs with financial support. In 2023,
we also continued with a female apprenticeship program in
our Generation business
the
recruitment of female students and train them to gain
valuable experiential learning in the trades.
to strategically
target
Workforce Health and Safety
The safety of our people, communities and
the
environment is one of our core values. Our focus on
Operational Excellence puts into action TransAlta’s value of
enabling a safe environment for our people and our
communities. Operational Excellence is about powering
and
safe,
environmentally-friendly and sustainable manner by
ensuring our assets operate reliably and efficiently.
communities
empowering
our
in
a
TransAlta's management systems underpin the delivery of
safe, reliable and competitive electricity to our customers
and partners. Our Total Safety Management System is a
combination of recognized best practices in process
safety, risk management, asset management, occupational
health, safety and environmental management. Since
expanding our Occupational Health and Safety program in
2015 to encompass Total Safety, we have transitioned
from
this
framework into continuous improvement, always striving to
achieve our Target Zero vision to operate our business
with
zero
environmental, health and safety incidents.
the development and
implementation of
zero unexpected
failures
asset
and
We made significant progress on our safety culture
transformation
and development
initiatives were a top priority in which we completed
behaviour-based safety training for all employees.
journey. Training
This training provides the tools and strategies to allow
employees to influence their individual behaviours and
encourage personal ownership over safety outcomes. It
helps create a psychologically safe environment in our
it encourages personal accountability
workplace as
towards safety.
risk
In 2023, our strong safety performance has been
supported by our strategic areas of focus: maturing our
tolerance and
safety culture, understanding
standardization of safety information and systems. To
support our safety cultural growth, new employees and
leaders completed training modules designed to gain tools
to understand their role in setting, building, and maintaining
our safety culture. Through peer board sessions designed
to embed an understanding of risk perception, risk
tolerance and psychological safety, leaders held over 100
sessions across the fleet.
One of our key safety indicator is the TRIF, which tracks
the number of injury incidents that require treatment
beyond first aid, relative to total exposure hours worked.
Our TRIF result for 2023 was 0.30 compared to 0.39
in 2022.
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The following represents our corporate safety performance and includes employees and contractors:
2023
2022
2021
1
4
0
0
6
0
3
9
5
3,362,000 3,058,000 4,134,000
0.30
0.39
0.82
We conduct annual Employee Engagement Surveys to
gauge the employee experience, and based on survey
results, leaders created action plans to drive improvement
and
increase engagement at the business unit and
team level.
Finally, we are focused on improving employee health and
well-being. To increase awareness, we have launched
education sessions on a variety of topics such as
mental health, women’s health, men’s health, nutrition,
resiliency, etc.
Organizational Structure
As of Dec. 31, 2023, we had 1,257 (2022 – 1,222) active
employees. This number increased by one per cent from
2022 levels. With approximately 30 per cent of our
employees being unionized, we strive to maintain open and
positive relationships with union representatives and
regularly meet to exchange information, listen to concerns
and share
ideas that further our mutual objectives.
Collective bargaining is conducted in good faith and we
respect
in
collective bargaining.
rights of employees
to participate
the
Our organizational structure changed
in 2023. Our
business continues to operate four generating segments,
with Gas, Wind and Solar, Hydro and Energy Transition,
with support from our Corporate and Growth Business
Units. Our operations portfolio is run by a single leadership
team, which provides operational and financial synergies,
thus enhancing our competitiveness.
Year ended Dec. 31
Lost-time injuries
Medical aids
Restricted work injuries
Exposure hours
Total Recordable Injury Frequency (TRIF)
We focus on leading indicators and participation through
(hazard, near miss, positive
Total Safety Reports
observations, and cybersecurity reports). Total Safety
Report Frequency demonstrates the proactive activities,
per worker per year, we are taking to identify and prevent
an injury or loss from occurring. We also report and
recognize positive behaviours in the workplace to enhance
psychological safety. This allows us to not only respond to
incidents if they occur but find opportunities to strengthen
barriers and layers of protection to mitigate potential
incidents. In 2023, we recorded 12.5 reports per worker,
which is above our target of 12. Evidence of the positive
impacts associated with strong engagement and a
maturing safety culture is apparent in TransAlta's overall
safety performance. In 2023, TransAlta was selected by
Canada’s Safest Employers to receive a Utilities and
Electrical Employer Excellence Award. TransAlta was also
recognized as the employer with the Best Wellness
Program across all industries, excelling in the promotion
and protection of employee overall wellness.
Organizational Culture and Structure
Our employees are central to value creation. Our corporate
culture has evolved and adapted throughout our 112-year
history. Our values are safety, innovation, sustainability,
respect and integrity. These five values help provide clarity
for our employees and guide our behaviour and decision-
making. They also provide a foundation for leadership,
collaboration, community support, personal growth and
work-life balance. Through corporate
initiatives and
support throughout all levels of leadership, we encourage
our employees to maximize their potential.
Culture Transformation
In 2022, we embarked on our culture transformation
journey with the goal of becoming a culture of results,
purpose and learning. We developed a three-year culture
strategy, Culture Charter and Culture Roadmap that
defines milestones. For alignment and transparency, all of
these documents are available to our employees. Part of
our culture transformation involves improving employee
psychological safety in order to increase employees to
speak up with a view to increase innovation, creativity and
ultimately, results.
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Employee Retention and Recognition
Talent Development
TransAlta places significant focus on talent development
and retention of
its employees. Annually, employees
complete a combination of optional, mandatory and
customized training as part of their roles. All employees
have access to learning sessions from speakers who are
experts on topics as varied as psychological safety, ED&I,
mental and physical health, culture, financial wellness, core
skills and leadership development.
ESG-Linked Compensation
At TransAlta, we have linked our ESG performance to our
employees’ compensation including that of our executive
leadership team. Our annual and long-term incentive pay
for performance plans are linked to TransAlta achieving
various ESG goals, where the targets and metrics are
reviewed and approved annually by our Board of Directors
and further outlined in our annual compensation plans.
In 2023, 20 per cent of our annual incentive plan was
linked to achieving specific ESG targets: 10 per cent
referred to our organizational culture improvements and 10
per cent was linked to safety. Further, 30 per cent of our
annual incentive plan was tied to growth, which is focused
on expanding TransAlta’s portfolio of renewable generation
and will help reduce the Company’s overall GHG emissions
intensity. Our long-term incentive plans include strategic
goals related to our focus on clean electricity, strong
renewables growth, leading in ESG policy development,
delivering on our culture plan and our ED&I strategy. Refer
to the Management Proxy Circular for additional details on
our ESG related compensation.
Employee Performance and Recognition
Coaching, feedback and management are fundamental to
our performance philosophy, with leaders and employees
being asked to participate in regular meetings to discuss
work progress, professional and career development
throughout the year.
include
rewards
We strive to be an employer of choice through our HR and
total
pay-for
programs, which
performance incentive plans, as reviewed and approved by
the Board of Directors. TransAlta’s annual and long-term
incentive plans are designed to measure and recognize
employees’ contributions towards metrics and targets. In
order to motivate and engage employees in a timely
manner, we continue to utilize employee recognition
programs, including a quarterly recognition program and a
peer-to-peer recognition program.
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Progressive Environmental Stewardship
We continue to increase financial value from natural or
environmental capital-related business activities, while
minimizing our environmental footprint and potential risk
factors related to environmental impacts. This section
covers natural capital management as per guidance from
the International Integrated Reporting Framework.
Environmental Strategy
All energy sources used to generate electricity have impact
on the environment. While we are pursuing a business
strategy that includes investing in renewable energy
resources such as wind, hydro and solar, we also believe
that natural gas will continue to play an important role in
meeting energy needs during our clean electricity
transition. Our environmental management processes
support our corporate strategy of ceasing GHG-intensive
coal operations. In 2026, our generation mix will be made
up of natural gas and renewable energy only.
Reducing the environmental
impact of our activities
benefits not only our operations and financial results, but
also the communities in which we operate. We have a
proactive approach to minimizing environmental risks and
we anticipate this strategy will benefit our competitive
position as stakeholders and society at large place an
increasing
environmental
management. Our Environmental Policy defines how we are
integrating the protection of nature and the environment
within TransAlta’s strategy, our Total Safety Management
System, as well as the principles of conduct for the
management of natural resources.
emphasis on
successful
Environmental Management System
to ensure we continuously
At TransAlta, we operate our facilities in line with best
practices related to environmental management standards.
Our environmental management processes are verified
improve our
annually
environmental
of
environmental management systems ("EMS") has matured
since we aligned our processes in accordance with the
internationally
ISO 14001 EMS standard.
Currently, the most material natural or environmental
performance. Our
recognized
knowledge
Year ended Dec. 31
Critically Endangered
Endangered
Vulnerable
Near threatened
Total biodiversity-related incidents
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TransAlta Corporation 2023 Integrated Report
capital impacts to our business are GHG emissions, air
emissions (i.e., pollutants) and energy use. Other material
impacts that we manage and track performance on via our
environmental management practices include land use,
water use and waste management.
In addition to our environmental management practices, we
are subject to environmental laws and regulations that
affect aspects of our operations, including air emissions,
water quality, wastewater discharges and the generation,
transport and disposal of waste and hazardous
substances. The Company’s activities have the potential to
damage natural habitat, impact vegetation and wildlife, or
cause contamination to land or water that may require
remediation under applicable laws and regulations. These
laws and regulations require us to obtain and comply with a
variety of environmental registrations, licenses, permits
and other approvals. The environmental regulations in the
jurisdictions in which we operate are robust. Both public
officials and private individuals may seek to enforce
environmental laws and regulations against the Company.
We
regulators on an
ongoing basis.
interact with a number of
Environmental Performance
Our performance on managing environmental aspects,
reducing our environmental impact and capitalizing on
environmental initiatives includes the following:
Biodiversity
importance of environmental protection and
The
biodiversity is outlined in our Environmental Policy as a
corporate responsibility for TransAlta and a responsibility
of each employee and contractor working on TransAlta's
behalf. In 2022, the Company adopted the target to
"achieve zero biodiversity-related incidents". This means
zero biodiversity-related incidents that affected habitats
and species included on the Red List of the International
Union for Conservation of Nature ("IUCN") from near-
threatened to critically endangered.
The following represents our biodiversity incidents in
accordance with the IUCN Red List classification:
2023
2022
2021
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Overseeing Biodiversity-Related Issues
TransAlta's GSSC assists the Board in fulfilling its oversight
responsibilities with respect to the Company’s monitoring
of environmental regulations, public policy changes and
the development of strategies, policies and practices for
the environment. For further information, refer to the
Sustainability Governance section of this MD&A.
Assessing Biodiversity Impacts of Our Value Chain
We consider the biodiversity impact at all of our existing
operations and the biodiversity impacts of all new growth
projects are evaluated in line with regulatory compliance
and with respect to TransAlta's focus on biodiversity
health. Details on how we assess biodiversity impacts of
our value chain are presented in the sections below.
Growth
Each new TransAlta development project must complete
an in-depth environmental assessment (as prescribed by
the local regulation and in line with our own assessment
practices) describing baseline environmental conditions,
identifying potential effects and developing mitigation
strategies for identified environmental sensitivities prior to
construction and operation. These assessments have been
specifically designed
the environmental
information requirements of the respective regions in
which we operate while identifying alignment with the
intent of the standards and/or regulations applicable to
these jurisdictions. Typically, our renewable projects are
greenfield development projects that require a higher level
of evaluation compared to our gas projects, which primarily
integrate into existing industrial facilities.
to meet
environmental NGOs
In addition, each greenfield development project has a
detailed community engagement plan designed to ensure
all potentially impacted host landowners, stakeholders,
agencies, businesses, non-governmental organizations
("NGOs"),
Indigenous
communities understand the nature of the projects, have
multiple and varied opportunities for engagement and
feedback and are able to engage in meaningful dialogue
and discussion with TransAlta and its representatives. The
ultimate goal
is addressing, resolving and mitigating
stakeholder or Indigenous community concerns before
filing major permit applications for all of our projects.
and
Day-to-day Operations
At our Alberta operations, in 2023, we continued with our
Wildlife Monitoring Program designed to monitor wildlife
abundance and species diversity in the study area over
time. Based on these surveys, TransAlta has seen primarily
stable or increasing biodiversity in the area, with various
new bird species being detected over the years and
incidents of vehicle collisions decreasing due to lower
speed limit restrictions. Some animal population sizes
fluctuate in the area based on weather conditions and
available ground cover.
Our natural gas operations have a relatively limited impact
on biodiversity. The facilities are frequently constructed
adjacent to existing industrial operations and TransAlta
may not always be the holder of the environmental permits.
The land area these facilities occupy is also generally
relatively small. One exception is our Sarnia cogeneration
facility. This facility is made up of 260 acres of brownfield
industrial land, some of which contains areas with tall
grasses and potential wildlife. Care will be taken at the
time of redevelopment of this land to minimize impact to
species-at-risk through the completion of species-at-risk
surveys as well as performing certain construction
activities outside of nesting periods. For all sites that are
under our environmental scope, we adhere to all relevant
environmental compliance permits.
At our hydro facilities, a major focus is on reducing the
impact on fish and its habitat. We adhere to provincial and
federal regulations and operate in accordance with facility
approvals. We continue to work toward operational
improvement and regularly review our Environmental
Operational Management Plans to ensure our operating
parameters are met.
asset
that our
to ensure
At our wind and solar operations, an Operational
Environmental Management Plan has been developed for
facilities use
each
environmentally-sound and responsible practices that are
based on a philosophy of continuous improvement of
environmental protection. Examples of environmental
initiatives to support our biodiversity focus include our bird
and bat protection practices (installation of covers to
protect birds from possible electrocution), a bird and bat
mortality database (records all injuries and mortalities),
environmentally-sensitive resource monitoring (monitoring
sensitive wildlife features in and around our operating wind
facilities), and long-term dataset collections (e.g., wildlife
studies pre-construction and post-construction).
In
addition, we continue to collaborate with industry and the
scientific community to address environmental concerns
and impacts pertaining to biodiversity.
At our Centralia operations, in 2023, we completed a
riparian reforestation plan for under-forested areas along
the Skookumchuck River within our Skookumchuck Wildlife
Habitat Management Area. We planted 15,620 trees along
both sides of the river to maintain the river banks and
decrease erosion, and we completed a vigorous weed
control program to control the proliferation of invasive
species; thus, improving overall habitat health. Additionally,
we harvested approximately 97,300 board feet of timber
consisting of diseased Red Alder and Douglas Fir to allow
for the growth of healthy trees as part of our overall wildlife
habit management program.
Energy Use
TransAlta uses energy in a number of different ways. We
burn natural gas, diesel and coal (to the end of 2025 at
TransAlta Corporation 2023 Integrated Report
M107
Centralia) to generate electricity. We harness the kinetic
energy of water and wind to generate electricity. We also
generate electricity from the sun. In addition to combustion
of fuel sources, we also track combustion of gasoline and
diesel in our vehicles and the electricity use and fuel use
for heating (such as natural gas) in the buildings we
occupy. Knowledge of how much energy we use allows us
to optimize and create energy efficiencies. As an electricity
generator, we continually and consistently look for ways to
optimize and create efficiencies related to the use
of energy.
The following captures our energy use (million gigajoules). Energy use increased by one (1) per cent in 2023 over 2022.
Some values do not sum to the indicated total due to rounding. Zeros (0) indicate truncated values:
Year ended Dec. 31
Hydro
Wind and Solar
Gas
Energy Transition
Corporate and Energy Marketing
Total energy use (million gigajoules)
Air Emissions
Our one remaining coal facility emits air emissions that we
track, analyze and report to regulatory bodies. We also
work on mitigation solutions depending on the type of air
emission. We report our major air emissions from coal,
which includes NOx, SO2, particulate matter and mercury.
We continue reducing air emissions in our existing facilities
through our conversion and retirement of coal units in
in 2021) and Washington State
Alberta
(planned completion by the end of 2025).
(completed
In 2022, we achieved our 2026 target of 95 per cent SO2
and 80 per cent NOx emissions reductions over 2005
levels. Since 2005, we have reduced SO2 emissions by 98
per cent and NOx by 83 per cent. In 2024, we will continue
to
for
air emissions.
review setting new environmental
targets
None of our previous Alberta coal facilities are located
within 50 kilometres of dense or urban populations and
they all have been retired or converted to gas as of 2021.
Our Centralia thermal facility in Washington State is located
40 kilometres from a dense or urban population. As per
guidance from SASB, “a facility is considered to be located
near an area of dense population if it is located within 49
kilometres of an area of dense population” (being deemed
to be a "minimum population of 50,000 persons"). In 2023,
the Centralia thermal facility accounted for 35 per cent of
total NOx, 99 per cent of total SO2, 30 per cent of total
Year ended Dec. 31
SO2 (tonnes)
NOx (tonnes)
Particulate matter (tonnes)
Mercury (kilograms)
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TransAlta Corporation 2023 Integrated Report
2023
2022
2021
0
0
123
73
0
197
0
0
130
64
0
195
0
0
118
86
0
204
particulate matter and 76 per cent of total mercury. The
facility has two units and we retired one unit in 2020 and
will retire the additional unit by the end of 2025, at which
time air emissions from our coal facilities will be eliminated.
trigger any
Our gas facilities emit sufficient levels of NOx that trigger
reporting obligations to national regulatory bodies. These
gas facilities also produce trace amounts of SO2 and
particulate matter, but at levels that are deemed negligible
requirements or
and do not
compliance issues. Many of our gas facilities are located in
very remote and unpopulated regions, away from dense
urban areas. Our Sarnia, Windsor, Ottawa, Fort
Saskatchewan and Ada gas facilities are our facilities with
air emissions within 49 kilometres of dense or
urban environments.
reporting
in 2023
total air emissions
Our
retained similar
performance to 2022 levels. This is due to the completion
of coal-to-gas conversions
in previous years, which
resulted in higher operational efficiency and reduction in air
emissions. The slight increase of particulate matter is due
to increased production of Centralia, which is the only
remaining coal plant within our portfolio.
The following represents our material air emissions. Figures
have been rounded for SO2 (to the nearest one hundred),
NOx (to the nearest one thousand), particulate matter (to
the nearest ten, when possible) and mercury (to the
nearest whole number):
2023
1,100
2022
1,200
2021
7,300
11,000
11,000
15,000
460
18
360
21
2,200
41
Water
Our principal water use is for cooling and steam generation
in our coal and gas facilities, but our hydro operations also
require water flow for operations. Water for coal and gas
operations is withdrawn primarily from rivers where we
hold permits and must therefore adhere to regulations on
the quality of discharged water. The difference between
withdrawal and discharge, representing consumption, is
due to several factors, which include evaporation loss and
steam production for customers, which we are unable
to recover.
to
reduce
In 2022, we achieved our water consumption reduction
target
consumption
(withdrawals minus discharge) by 20 million m3 or 40 per
cent in 2026 over the 2015 baseline. Water consumption in
2015 was 45 million m3. This target is in line with the UN
fleet-wide water
Year ended Dec. 31
Water withdrawal
Water discharge
Total water consumption (million m3)
Water Security
Our largest water withdrawal and discharge occurs at our
Sarnia gas cogeneration facility (which produces both
electricity and steam for our customers). The facility
operates as a once-through, non-contact cooling system
for our steam turbines. Despite large withdrawals from the
adjacent St. Clair River to support our Sarnia operations,
we return approximately 97 per cent of the water
withdrawn. Water from this source is currently at low risk
as per analysis from the SASB-endorsed Aqueduct Water
Risk Atlas tool.
The Aqueduct Water Risk Atlas tool highlights that water
risk is high at our interior and southern Western Australia
facilities due to high interannual variability in the region.
Interannual variability refers to wider variations in regional
water supply from year to year. Our water supply at these
facilities is provided at no cost under PPAs with our mining
customers, hence our risk is significantly mitigated. In
addition, our customers have developed conservation and
re-use strategies aimed at recycling water for mining
operational needs. All water used in the region is sourced
from scheme water. With respect to gas and diesel turbine
water use, water wash techniques and frequency of
activities are continually modified to minimize consumption
and environmental impact. Water used in our operations is
returned to our customers, who repurpose this water for
vegetation and dust suppression in their mining operations.
At the South Hedland facility in Western Australia, water
risk is also high due to the risk of flooding in the region.
The South Hedland facility was built above normal flood
levels to mitigate potential risk from flooding. During a
SDGs, specifically "Goal 6: Clean Water and Sanitation." In
2024, we will continue
review setting new
environmental targets for water consumption.
to
In 2023, we withdrew approximately 273 million m3 (2022 –
233 million m3) and returned approximately 239 million m3
(2022 – 207 million m3) or 88 per cent. Overall, water
consumption was approximately 34 million m3 (2022 – 26
million m3). Water consumption increased primarily due to
an increase in production compared to last year. This is
particularly observed in Centralia, our last transition-coal
plant with the highest water consumption intensity.
The following represents our total water consumption
(million m3) over the last three years. Some values do not
sum to the indicated total due to rounding. Figures below
have been rounded to the nearest million m3:
2023
2022
2021
273
239
34
233
207
26
241
209
32
category 4 cyclone event in the area and associated
flooding in the region in 2019, the South Hedland facility
continued to generate power for the region. In addition, the
South Hedland facility has developed a Water Efficiency
Management Plan with Water Corporation WA, the principal
supplier of water, wastewater and drainage services in
Western Australia. Initiatives are aimed at reducing water
consumption and costs through innovative technology and
efficiencies identified through facility management.
Dam Safety
Our dam safety programs
include all hydroelectric
developments, constructed ponds and fluid retaining
structures such as ash lagoons and canals, as well as
associated equipment and structures and the personnel
required to operate, maintain and inspect these items.
They are governed through our Dam Safety Policy and
includes
Dam Safety Management System, which
and
requirements
decommissioning,
and
surveillance, public safety, emergency management and
risk management.
modification
maintenance
design,
operation,
on
TransAlta’s Board and its President and CEO oversee the
effectiveness of our dam safety programs and receive
regular updates. In 2022, a member of the Board was
designated as the Company's Dam Safety Advisor to assist
the Board in fulfilling its oversight role in regard to the
Company's dam safety practices given the unique and
technical aspects of dam safety. In addition, TransAlta
engages an external Dam Safety Review Panel to provide
external review of the program and its management,
including overall assessment and benchmarking against
TransAlta Corporation 2023 Integrated Report
M109
other national and international programs. Our monitoring
programs include:
• Regular operations and engineering inspections;
• Testing of critical equipment;
• Numerous instruments in the dams monitoring water
level, temperature, movement, earthquake detection;
• Use of drones and satellite remote movement monitoring;
• Emergency plans and exercises with internal and external
stakeholders; and
• Regular
third-party
reviews
that are shared with
the regulators.
local stakeholders
We work closely with
including
conservation authorities and public agencies on watershed
management, emergency planning and flood response. For
example, in Southern Alberta, our hydroelectric facilities
have played an increasingly important water management
role following the flood of 2013. In 2021, we renewed our
previous agreement with the Government of Alberta for
another five years to manage water on the Bow River at
our Ghost Reservoir facility to aid in potential flood
mitigation efforts, as well as at our Kananaskis River
System (which includes the Interlakes, Pocaterra and
Barrier hydroelectric plants) for drought mitigation efforts.
In 2022, we started decommissioning the Keephills Ash
Lagoon, a facility that is no longer needed for ash storage
following the coal-to-gas conversion of Keephills Unit 2.
This three-year project will reshape the existing lagoon so
that it is stable for the long term and is the first step
towards delicensing the structure.
TransAlta is proud of its reputation in dam safety. We
participate in the Canadian Dam Association, Dam Safety
Interest Group of the Centre for Energy Advancement
through Technological Innovation, United States Society on
Dams, Canadian Geotechnical Society, Dam Safety
Advisory Committee of the Alberta Chamber of Resources
and Association of State Dam Safety Officials.
For information on our corporate emergency management
program, refer to Public Health and Safety in the Engaging
with Our Stakeholders to Create Positive Relationships
section of this MD&A.
Waste
The importance of environmental protection and waste
management is outlined in our Environmental Policy as a
corporate responsibility for TransAlta and its employees,
and contractors working on TransAlta's behalf. Our waste
data
is reported annually to a number of different
regulatory bodies.
In 2023, our operations generated approximately 479,000
tonnes equivalent of waste (2022 – 204,000 tonnes). Of
the total waste generated, 97 per cent was non-hazardous
waste and 0.2 per cent was directed to landfill (2022 – 0.9
per cent). The main reason for the increase in total waste is
due to the waste reuse. Since its retirement, we have been
selling ash from our Highvale and Centralia Mine, which
accounts for 95 per cent of the total waste generated.
The following represents our total waste production over
the last three years. Figures have been rounded to the
nearest one thousand:
Year ended Dec. 31
Total waste generation (tonnes equivalent)
Waste to landfill (tonne eq.)
Waste recycled (tonne eq.)
Waste reuse (tonne eq.)
% of total waste to landfill
% of total waste: hazardous
% hazardous waste to landfill
2023
2022
2021
479,000
204,000
514,000
1,000
1,900
1,000
19,000
22,000
31,000
457,000
151,000
176,000
0.2
3
0.0
0.9
9
0.6
0.2
5
1.0
Our reuse waste or byproduct waste is generally sold to
third parties. Our operating teams are diligent at not only
minimizing waste, but also maximizing recoverable value
from waste. We have invested in equipment to capture
byproducts from the combustion of coal, such as fly ash,
bottom ash, gypsum and cenospheres, for subsequent
sale. These non-hazardous materials add value to products
like cement and asphalt, wallboard, paints and plastics.
Coal Ash Management
Given our transition off coal, we ceased producing fly ash
waste in Canada at the end of 2021 and will no longer
produce it past the end of 2025 in the US. In 2023, Lafarge
Canada and TransAlta entered into an agreement that will
advance low-carbon concrete projects in Alberta. The
project will repurpose landfilled fly ash, a waste product
from TransAlta’s Highvale mine, which ceased operations in
2021. The ash will be used to replace cement in concrete
manufacturing. By turning the recovered product into
something marketable, it will continue to aid in reducing
the amount of cement produced and consequent
emissions while offering new job and economic growth
opportunities. This innovative technology contributes to a
circular economy and will reduce reclamation liabilities
for TransAlta.
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TransAlta Corporation 2023 Integrated Report
Land Use
Our largest land use had been associated with land
disturbed by surface mining of coal, which ceased
operations in 2021. Of the three mines we operated, the
Whitewood mine in Alberta is completely reclaimed and the
land certification process is ongoing. Our Centralia mine in
Washington State is currently in the reclamation phase and
we have adopted a target to fully reclaim this mine
by 2040.
Our Highvale mine in Alberta ceased operations on Dec. 31,
2021, as part of our target to discontinue coal-fired power
generation in Canada at the end of 2021. The mine
reclamation of Highvale has been progressively executed
as part of our regulatory approvals and our target is to
have it fully reclaimed by 2046. In 2022, our reclamation
team submitted our final reclamation plans. The updated
plans align with community priorities for the reclaimed land.
Our reclamation plans at Highvale are set out on a life-
cycle basis and include contouring disturbed areas, re-
establishing drainage, replacing topsoil and subsoil, re-
vegetation and land management.
Our mining practices incorporate progressive reclamation
where the final end use of the land is considered at all
Regulatory non-compliance environmental incidents follow:
stages of planning and development. To date, we have
reclaimed approximately 4,900 hectares, which
is
approximately 39
land disturbed
(12,600 hectares).
cent
per
of
Environmental Incidents and Spills
risk. We maintain corporate
Protecting the environment supports healthy ecosystems
and mitigates our environmental compliance risk and
incident
reputational
management procedures, as part of our Total Safety
Management System, for response,
investigation and
lessons learned to minimize environmental incidents. With
respect to biodiversity management (management of
ecosystems, natural habitats and life in the areas we
operate), we seek to establish robust environmental
research and data collection to establish scientifically
sound baselines of the natural environment around our
facilities to ensure we can accurately evaluate the level of
significance to biodiversity following an incident. We
closely monitor the air, land, water and wildlife in these
areas to identify and curtail potential impacts.
In 2023, no regulatory non-compliance environmental
incidents were recorded (2022 – one incident). No fines or
environmental enforcement actions occurred.
Year ended Dec. 31
Regulatory non-compliance environmental incidents
2023
2022
0
1
2021
2
Regarding spills and releases, efforts are placed on
providing immediate response to all environmental spills to
ensure assessment, containment and recovery of spilled
materials result in minimal impact to the environment.
The volume of spills in 2023 was zero (0) m3 (2022 –
246 m3).
Significant environmental incidents follow:
Year ended Dec. 31
Significant environmental incidents
2023
2022
0
0
2021
0
There is a potential that ash ponds associated with our
retired coal mines could fail. The probability of this
occurring is low, but the impact could be significant. We
follow applicable environmental regulations with respect to
our ash ponds and satisfy ourselves that management is
adequate given our approach to dam safety and the robust
regulations
jurisdictions where we operate.
Management includes periodic inspections and appropriate
mitigation if issues are uncovered.
the
in
Weather
Abnormal weather events can impact our operations and
give rise to risks. Due to the nature of our business, our
earnings are sensitive to seasonal weather variations.
Variations
in winter weather affect the demand for
electrical heating requirements while variations in summer
for electrical cooling
weather affect
requirements. These variations in demand translate into
the demand
spot market price volatility. Variations in precipitation also
affect water supplies, which in turn affect our hydroelectric
assets. Also, variations in sunlight conditions can have an
effect on energy production levels from our solar facilities.
Variations in weather may be impacted by climate change
resulting in sustained higher temperatures and rising sea
levels, which could have an impact on our generating
assets. Ice can accumulate on wind turbine blades in the
winter months. The accumulation of ice on wind turbine
blades depends on a number of factors,
including
temperature and ambient humidity. Accumulated ice can
have a significant impact on energy yields and could result
in the wind turbine experiencing more downtime. Extreme
cold temperatures can also impact the ability of wind
turbines to operate effectively and this could result in more
downtime and reduced production. In addition, climate
change could result in increased variability to our water
and wind resources.
TransAlta Corporation 2023 Integrated Report
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Our generation facilities and their operations are exposed
to potential damage and partial or complete loss resulting
from environmental disasters (e.g., floods, strong winds,
wildfires, earthquakes, tornados and cyclones), equipment
failures and other events beyond our control. Climate
change can increase the frequency and severity of these
extreme weather events. The occurrence of a significant
event that disrupts the operation or ability of the
generation facilities to produce or sell power for an
extended period, including events that preclude existing
customers from purchasing electricity, could have a
material adverse effect. In certain cases, there is the
potential that some events may not excuse us from
performing our obligations pursuant to agreements with
third parties. The fact that several of our generation
facilities are located in remote areas may make access for
repair of damage difficult. Refer to the Governance and
Risk Management section of this MD&A for further
discussion on weather-related risks.
Delivering Reliable and Affordable Energy
TransAlta’s goal is to be a leading customer-centred clean
electricity company, one that is committed to a sustainable
future. Our strategy is focused on meeting our customers'
need for clean, low-cost and reliable electricity, operational
excellence and continual improvement in everything that
we do. This section covers manufactured, intellectual and
relationship capital management as per
social and
Integrated
from
guidance
Reporting Framework.
International
the
Energy Affordability
TransAlta focuses on assisting commercial and industrial
customers in managing their cost of energy. TransAlta has
a full suite of procurement strategies and products with
various terms available to our customers to assist in
understanding and reducing their energy costs.
interested
in making a
For customers
long-term
commitment to obtain predictable costs, TransAlta has the
experience to develop renewable energy facilities, battery
energy storage systems and hybrid solutions, or long-term
offtake agreements from its existing and future renewable
and gas-fired facilities.
End-Use Efficiency and Demand
and
commercial
customers
TransAlta’s
have access
set of monthly
reports providing detailed tracking of customer usage,
allowing for corrective action as required, as well as
cost-saving recommendations.
to an extensive
industrial
Our Power Factor Report advises customers if their sites
are operating at less than a 90 per cent power factor so
they can consider installing energy-efficient equipment. By
reducing the customer’s power system demand charge
through power factor correction, the customer’s site puts
less strain on the electricity grid and reduces its carbon
footprint. TransAlta’s Site Health Report advises customers
of a site whose peak demand has been permanently
reduced for a variety of reasons from its initial in-service
date. The customer may be paying a higher demand
charge each month to the distribution company based on
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TransAlta Corporation 2023 Integrated Report
the original peak demand expected at the site. TransAlta
collaborates with the customer and determines the new
peak demand based on the customer’s operation. The
customer, working with the distribution company, may find
it economic to buy down the distribution contract to
reduce the monthly distribution costs going forward.
Grid Resiliency
As a large electricity generator, TransAlta works diligently
to ensure the power we provide our customers is reliable,
affordable and has low environmental impact. We provide
decentralized and customized power solutions to industrial
customers. In 2023, TransAlta completed the Northern
Goldfields solar facilities in Western Australia to provide
renewable solar electricity supported with a battery energy
storage system to the Goldfields-based operations of BHP.
We also supply power to centralized power systems and
own and operate transmission grid infrastructure in Alberta
that addresses system reliability needs.
In all jurisdictions where we operate, we work closely with
the system operators to ensure overall supply adequacy
and reliability of the grid. We consider a myriad of factors
in our planning and operation decisions that could put grid
resiliency at risk, including renewable energy intermittency,
cyberattacks, extreme weather events and natural
disasters. We are also committed to ensuring strong
compliance with North American Electric Reliability
Corporation standards and Alberta Reliability Standards for
the power plant and transmission infrastructure that we
own and operate.
As a Company, we are keenly focused on deploying clean
power generation and new technology solutions to meet
the emerging and future needs of the electric system that
we operate in. For example, in Alberta, we brought online
the first battery storage project, called WindCharger, in
2020 that is co-located with our Summerview II wind
facility to create an emissions-free, peaking resource. This
resource participates
frequency
response ancillary services market to support intertie
response,
operations. Beyond
WindCharger introduces a resource with a response time
the AESO’s
frequency
fast
fast
the
in
that can be operated with a high level of reliability to
support the growing need for primary frequency response
and system frequency support and resiliency to support a
decarbonized grid with a supply mix made up of
intermittent renewable resources.
For more information on technologies to support grid
resiliency, refer to the Enabling Innovation and Technology
Adoption section of this MD&A. For more information on
extreme weather events and natural disasters, refer to
Weather in the Progressive Environmental Stewardship
section of this MD&A.
Sustainability Governance
In order for an organization to truly integrate sustainability,
it requires accountability at the Board and executive level.
It requires an understanding of ESG issues and associated
corporate actions to address these issues, while continuing
to balance operations and growth.
Sustainability is overseen by TransAlta's GSSC of the
Board. The GSSC assists the Board in fulfilling its oversight
responsibilities with respect to the Company’s monitoring
of climate change, environmental, health and safety
regulations, public policy changes and the development of
strategies, policies and practices for climate change,
environment, health and safety and social well-being,
including human
and
rights, working
responsible sourcing.
conditions
following policies help govern sustainability at
The
TransAlta and are publicly available in the Governance
section of the Investor Centre on our website:
• Corporate Code of Conduct
• Supplier Code of Conduct
• Whistleblower Policy
• Total Safety Management Policy
• Human Rights and Discrimination Policy
• Indigenous Relations Policy
• Board and Workforce Diversity Policy and Diversity and
Inclusion Pledge
• Environmental Policy
In 2023, our sustainability memberships included key
sustainability organizations and working groups such as
the EXCEL Partnership, the Canadian Business for Social
Responsibility and the Electricity Canada Sustainable
Electricity Steering Committee, which all provide validation
and support of our sustainability strategy and practices.
In 2022, we refreshed our material sustainability factors.
They are presented below in alphabetical order.
• Air quality and emissions
• Asset integrity and grid resiliency
• Biodiversity and land management
• Climate change and greenhouse gas emissions
• Dam safety
• Energy use and conservation
• Equity, diversity and inclusion
• Ethics and business conduct
• Health, safety and well-being
• Human rights and labour practices
• Indigenous relationships and partnerships
• Information asset protection and cybersecurity
• Renewable energy and innovative technologies
• Security and emergency preparedness and response
• Stakeholder engagement and community investment
• Supply chain and sustainable sourcing
• Sustainability governance
• Sustainable finance
• Talent attraction, retention and development
• Waste management
• Water management
For additional details on governance, refer to the
Governance and Risk Management section of this MD&A.
TransAlta Corporation 2023 Integrated Report
M113
Governance and Risk Management
Our business activities expose us to a variety of risks and
opportunities including, but not limited to, regulatory
changes, rapidly changing market dynamics and increased
volatility in our key commodity markets. Our goal is to
manage these risks and opportunities so that we are in a
position to develop our business and achieve our goals
while
an
unacceptable level of risk or financial exposure. We use a
multilevel risk management oversight structure to manage
the risks and opportunities arising from our business
activities, the markets in which we operate and the political
environments and structures with which we interact.
reasonably
protected
remaining
from
Governance
The key elements of our governance practices are:
• Employees, management and the Board are committed to
ethical business conduct, integrity and honesty;
• We have established key policies and standards to
provide a framework for how we conduct our business;
• The Chair of our Board and all directors, other than our
President and CEO, are independent within the meaning
of National Instrument 58-101 — Disclosure of Corporate
Governance Practices;
• The Board is comprised of individuals with a mix of skills,
knowledge and experience that are critical for our
business and our strategy;
• The effectiveness of the Board is achieved through
robust annual evaluations and continuing education of
our directors; and
• Our management and the Board facilitate and foster an
and
with
shareholders
open
community stakeholders.
dialogue
Commitment to ethical conduct is the foundation of our
corporate governance model. We have adopted the
following codes of conduct to guide our business decisions
and everyday business activities:
• Corporate Code of Conduct, which applies to all
employees and officers of TransAlta and its subsidiaries;
• Directors’ Code of Conduct;
• Supplier's Code of Conduct;
• Finance Code of Ethics, which applies to all financial
employees of the Company; and
• Energy Trading Code of Conduct, which applies to all of
our employees engaged in energy marketing.
Our Corporate Code of Conduct outlines the standards and
expectations we have
for our employees, officers,
directors, consultants and suppliers with respect to, among
other things, the protection and proper use of our assets.
The codes also provide guidelines with respect to securing
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TransAlta Corporation 2023 Integrated Report
our assets, avoiding conflicts of interest, respect in the
workplace, social responsibility, privacy, compliance with
laws, insider trading, environment, health and safety and
our commitment to ethical and honest conduct. Our
Corporate Code of Conduct and Directors' Code of
Conduct each goes beyond the laws, rules and regulations
that govern our business in the jurisdictions in which we
operate; they outline the principal business practices with
which all employees and directors must comply.
of
the
about
ethics
importance
Our employees, officers and directors are reminded
annually
and
professionalism
in their daily work and must certify
annually that they have reviewed and understand their
responsibilities as set forth in the respective codes of
conduct. This certification also requires our employees,
officers and directors to acknowledge that they have
complied with the standards set out in the respective code
during the last calendar year.
for
the
The Board provides stewardship of the Company and
ensures that the Company establishes key policies and
procedures
identification, assessment and
management of principal risks and strategic plans. The
Board monitors and assesses the performance and
progress of the Company’s goals through candid and
timely reports from the CEO and the senior management
team. We have also established an annual evaluation
process whereby our directors are provided with an
opportunity to evaluate the Board, Board committees,
individual
the
Board’s performance.
directors
Chair
and
the
of
In order to allow the Board to establish and manage the
financial, environmental and social elements of our
governance practices, the Board has delegated certain
responsibilities to the AFRC, GSSC, the Human Resources
Committee (the “HRC”) and the Investment Performance
Committee ("IPC").
the
The AFRC, consisting of independent members of the
Board, provides assistance to the Board in fulfilling its
oversight responsibility relating to the integrity of our
consolidated
financial
financial statements and
reporting process; the systems of internal accounting and
financial controls; the internal audit function; the external
auditors’ qualifications and terms and conditions of
appointment,
independence,
performance and reports; and the legal and risk compliance
programs as established by management and the Board.
The AFRC approves our Commodity and Financial
Exposure Management policies and reviews quarterly
ERM reporting.
remuneration,
including
is
The GSSC
and
recommending to the Board a set of corporate governance
principles applicable to the Company and for monitoring
for developing
responsible
compliance with these principles. The GSSC
is also
responsible for Board recruitment, succession planning and
for the nomination of directors to the Board and its
committees. In addition, the GSSC assists the Board in
fulfilling its oversight responsibilities with respect to the
Company’s monitoring of climate change, environmental,
health and safety regulations, public policy changes and
the development of strategies, policies and practices for
climate change, environmental, health and safety and
social well-being,
rights, working
conditions and responsible sourcing. The GSSC also
receives an annual report on the annual codes of conduct
certification process. For further information on the Board's
oversight of climate-related factors, refer to the Climate
Change Governance in the ESG section of this MD&A.
including human
In regards to overseeing and seeking to ensure that the
Company consistently achieves strong environment, health
and safety (“EH&S”) performance, the GSSC undertakes a
number of actions that include: (i) receiving regular reports
from management regarding environmental compliance,
trends and TransAlta’s responses; (ii) receiving reports and
briefings on management’s initiatives with respect to
changes in climate change legislation, policy developments
as well as other draft initiatives and the potential impact
such initiatives may have on our operations; (iii) assessing
the impact of the GHG policies implementation and other
legislative
the Company’s business;
(iv) reviewing with management the EH&S policies of the
Company; (v) reviewing with management the health and
safety practices implemented within the Company, as well
as the evaluation and training processes put in place to
address problem areas; (vi) discussing with management
ways to improve the EH&S processes and practices; (vii)
considering and recommending our sustainability targets to
the Board and evaluating our performance against such
targets; and (viii) reviewing the effectiveness of our
response to EH&S issues and any new initiatives put in
place to further improve the Company’s EH&S culture.
initiatives on
The HRC is empowered by the Board to review and
approve key compensation and human resources policies
of the Company that are intended to attract, recruit, retain
and motivate employees of the Company. The HRC also
makes recommendations to the Board regarding the
compensation of the CEO, including the review and
adoption of equity-based incentive compensation plans,
the adoption of human resources policies that support
human rights and ethical conduct and the review and
approval of executive management succession and
development plans.
IPC
is empowered by the Board to oversee
The
management's investment conclusions and the execution
of major, Board-approved capital expenditure projects that
further the Company's strategic plans. The IPC provides
its oversight
assistance
responsibilities with respect to broadly reviewing and
the Board
fulfilling
to
in
monitoring project management and control processes,
financial profile, capital costs, procurement practices and
project schedules in a more in-depth manner than time
permits during regularly scheduled Board meetings.
The responsibilities of other stakeholders within our risk
management oversight structure are described below:
The CEO and executive management review and report on
key risks quarterly. Specific Trading Risk Management
reviews are held monthly by the Commodity Risk and
Compliance Committee and weekly by the commodity risk
team, the commercial managers in Trading and Marketing
and the Executive Vice-President, Finance and Chief
Financial Officer.
The Investment Committee is a management committee
chaired by our Senior Vice-President, M&A, Strategy and
Treasurer and comprises the President and Chief Executive
Officer; Executive Vice-President, Finance and Chief
Financial Officer; Executive Vice-President, Generation;
Executive Vice-President, Commercial and Customer
Relations; and Vice-President, Strategic Finance and
Investor Relations. It reviews and approves all major capital
expenditures including growth, productivity, life extensions
and major coal outages. Projects that are approved by the
Investment Committee will then be put forward for
approval by the Board, if required.
The Commodity Risk & Compliance Committee is chaired
by our Executive Vice-President, Finance and Chief
Financial Officer and comprises at least three members of
senior management. It oversees the risk and compliance
program in trading and ensures that this program is
adequately resourced to monitor trading operations from a
risk and compliance perspective. It also ensures the
existence of appropriate controls, processes, systems and
procedures to monitor adherence to policy.
The Hydro Operating Committee consists of two members
who are Brookfield employees with expertise in hydro
facility management and two TransAlta members. This
committee was formed
in 2019 for the purpose of
collaborating on matters in connection with the operation
and maximization of the value of TransAlta's Alberta Hydro
Assets. It is delivering on its objectives by reviewing the
operating, maintenance, safety and environmental aspects
of TransAlta's Alberta Hydro Assets and, following that
review, providing expert advice and recommendations to
TransAlta’s hydro operational team. The Hydro Operating
Committee has an initial term of six years, which can be
extended for an additional two years.
TransAlta is listed on the Toronto Stock Exchange and the
New York Stock Exchange and
is subject to the
governance regulations, rules and standards applicable
under both exchanges. Our corporate governance
practices meet the following governance rules and
the TSX and Canadian Securities
guidelines of
Instrument 52-109 —
(i) Multilateral
Administrators:
TransAlta Corporation 2023 Integrated Report
M115
(ii) National
Certification of Disclosure in Issuers’ Annual and Interim
Filings;
Instrument 52-110 — Audit
Committees; (iii) National Policy 58-201 — Corporate
Governance Guidelines; and (iv) National Instrument 58-101
— Disclosure of Corporate Governance Practices. As a
“foreign private issuer” under US securities laws, we are
generally permitted to comply with Canadian corporate
governance requirements. Additional information regarding
our governance practices can be found in our most recent
management information circular.
Risk Controls
Our risk controls have several key components:
Enterprise Tone
We strive to foster beliefs and actions that are true to and
respectful of, our many stakeholders. We do this by
investing
live and work,
operating and growing sustainably, putting safety first and
being responsible to the many groups and individuals with
whom we work.
in communities where we
Policies
We maintain a comprehensive set of enterprise-wide
policies. These policies establish delegated authorities and
limits for business transactions, as well as allow for an
exception approval process. Periodic reviews and audits
are performed to ensure compliance with these policies. All
employees and directors are required to sign a Corporate
Code of Conduct on an annual basis.
Reporting
On a regular basis, residual risk exposures are reported to
key decision-makers including the Board, the AFRC, senior
management and/or the Commodity Risk & Compliance
Committee, as applicable. Reporting
latter
committee includes analysis of new risks, monitoring of
status to risk limits, review of events that can affect these
risks and discussion and review of the status of actions to
minimize
for
effective and timely risk management and oversight.
risks. This monthly
reporting provides
this
to
Whistleblower System
We have a process in place where employees, contractors,
shareholders or other stakeholders may confidentially or
anonymously report any potential legal or ethical concerns,
including concerns relating to accounting, internal control
accounting, auditing or financial matters or relating to
alleged violations of any laws or our Corporate Code of
Conduct. These concerns can be submitted confidentially
and anonymously, either directly to the AFRC or through
TransAlta’s toll-free telephone or online Ethics Helpline.
The AFRC Chair is immediately notified of any material
complaints and, otherwise, the AFRC receives a report at
every quarterly committee meeting on all findings related
to any material complaints or complaints relating to
accounting or financial reporting or alleged breaches in
internal controls over financial reporting.
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TransAlta Corporation 2023 Integrated Report
Value at Risk and Trading Positions
Value at risk (“VaR”) is one of the primary measures used to
manage our exposure to market risk resulting from
commodity risk management activities. VaR is calculated
and reported on a daily basis. This metric describes the
potential change in the value of our trading portfolio over a
three-day period within a 95 per cent confidence level,
resulting from normal market fluctuations.
VaR is a commonly used metric that is employed by
industry to track the risk in commodity risk management
positions and portfolios. Two common methodologies for
estimating VaR are the historical variance/covariance and
scenario analysis approaches. We estimate VaR using the
historical variance/covariance approach. An
inherent
limitation of historical variance/covariance VaR is that
historical information used in the estimate may not be
indicative of future market risk. Stress tests are performed
periodically to measure the financial impact to the trading
portfolio resulting from potential market events, including
fluctuations in market prices, volatilities of those prices and
the relationships between those prices. We also employ
additional risk mitigation measures. VaR at Dec. 31, 2023,
associated with our proprietary
risk
management activities was $4 million (2022 – $4 million).
Refer to the Risk Factors – Commodity Price Risk section of
this MD&A below for further discussion.
commodity
Risk Factors
in
Risk is an inherent factor of doing business. The following
section addresses some, but not all, risk factors that could
affect our future plans, performance, results or outcomes
and our activities in mitigating those risks. These risks do
not occur
in
conjunction with each other. Further information on the
Company's risk factors can be found in the Risk Factors
section of the AIF, which risk factors are hereby
incorporated by reference and available on our website at
www.transalta.com and under our profile on SEDAR+ at
www.sedarplus.ca and on EDGAR at www.edgar.gov.
isolation, but must be considered
A reference herein to a material adverse effect on the
Company means such an effect on the Company or its
results of
business, operations,
operations and/or its cash flows, as the context requires.
financial condition,
For some risk factors, we show the after-tax effect on net
earnings (loss) of changes in certain key variables. The
analysis is based on business conditions and production
volumes in 2023. Each item in the sensitivity analysis
assumes all other potential variables are held constant.
While these sensitivities are applicable to the period and
the magnitude of changes on which they are based, they
may not be applicable in other periods, under other
economic circumstances or for a greater magnitude of
changes. The changes in rates should also not be assumed
to be proportionate to earnings in all instances.
Volume Risk
We manage volume risk by:
Volume risk relates to the variances from our expected
production. The financial performance of our hydro, wind
is highly dependent upon the
and solar operations
availability of their input resources in a given year. Shifts in
weather or climate patterns, seasonal precipitation and the
timing and rate of melting and runoff may impact the water
flow to our facilities. The strength and consistency of the
wind resource at our facilities impacts production. The
operation of thermal facilities can also be impacted by
ambient temperatures and the availability of water and
fuel. Where we are unable to produce sufficient quantities
of output in relation to contractually specified volumes, we
may be required to pay penalties or purchase replacement
power in the market.
• Actively managing our assets and their condition to be
proactive in facility maintenance so that our facilities are
available to produce when required;
• Monitoring water resources throughout Alberta to the
best of our ability and optimizing this resource against
real-time electricity market opportunities;
• Placing our facilities in locations we believe to have
adequate resources to generate electricity to meet the
requirements of our contracts. However, we cannot
guarantee that these resources will be available when we
need them or in the quantities that we require; and
• Diversifying our fuels and geography to mitigate regional
or fuel-specific events.
The sensitivity of volumes to our net earnings is shown below:
Factor
Availability/production
Generation Equipment and Technology Risk
There is a risk of equipment failure due to wear and tear,
latent defect, design error or operator error, among other
things, which could have a material adverse effect on the
Company. Although our generation facilities have generally
operated in accordance with expectations, there can be no
assurance that they will continue to do so. Our facilities are
exposed to operational risks such as failures due to cyclic,
thermal and corrosion damage in boilers, generators and
turbines, as well as other issues that can lead to outages
and increased production risk. If facilities do not meet
availability or production targets specified in their PPA or
other
long-term contracts, we may be required to
compensate the purchaser for the loss in the availability of
reduced energy or capacity
production or
payments. For merchant facilities, an outage can result in
lost merchant opportunities. Therefore, an extended
outage could have a material adverse effect on our
business, financial condition, results of operations or our
cash flows.
record
As well, we are exposed to procurement risk for
specialized parts that may have long lead times. If we are
unable to procure these parts when they are needed for
maintenance activities, we could face an extended period
where our equipment is unavailable to produce electricity.
We manage our generation equipment and technology
risk by:
• Operating our facilities within defined industry standards
their commercial
that optimizes availability over
operating life;
Increase or
decrease
(per cent)
Approximate
impact on net
earnings
(millions)
1
$20
• Performing preventive maintenance in accordance with
applicable industry practices, major equipment supplier
recommendations and our operating experience;
• Adhering to comprehensive maintenance programs and
regular turnaround schedules;
• Adjusting maintenance plans by
facility to reflect
equipment type, age and commercial risk;
• Having adequate business interruption insurance in place
to cover extended forced outages;
• Having clauses
long-term
contracts that allow us to declare force majeure in the
event of an unforeseen failure;
in our PPAs and other
• Selecting and applying proven
technology
in our
generating facilities, where practical;
• Where technology is newer, ensuring service agreements
with equipment suppliers include appropriate availability
and performance guarantees;
• Monitoring our fleet against industry performance to
identify
impact
issues or advancements that may
performance and adjusting our maintenance and
investment programs accordingly;
• Negotiating strategic supply agreements with selected
vendors to ensure key components are readily available
in the event of a significant outage;
• Monitoring the condition of our assets and performing
predictive analytics, and adjusting our maintenance
programs to maintain availability;
• Entering into long-term arrangements with our strategic
supply partners to ensure availability of critical spare
parts; and
TransAlta Corporation 2023 Integrated Report
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• Implementing long-term asset management strategies
that optimize the life cycles of our existing facilities and/
or
for
generating assets.
requirements
replacement
identify
Commodity Price Risk
We have exposure to movements in certain commodity
prices, including the market price of electricity and fuels
in both our electricity
used
generation and proprietary trading businesses.
to produce electricity
We manage the financial exposure associated with
fluctuations in electricity price risk by:
• Entering into long-term contracts that specify the price at
which electricity, steam and other services are provided;
• Maintaining a portfolio of short-, medium- and long-term
to short-term
to mitigate our exposure
contracts
fluctuations in commodity prices;
• Purchasing natural gas coincident with production for
merchant facilities so spot market spark spreads are
adequate to produce and sell electricity at a profit; and
• Ensuring
limits and controls are
in place for our
proprietary trading activities.
In 2023, we had approximately 84 per cent (2022 – 83 per
cent) of total production under short-term and long-term
contracts and hedges. In the event of a planned or
unplanned outage or other similar event, however, we are
exposed to changes in electricity prices on purchases of
electricity from the market to fulfil our supply obligations
under these short- and long-term contracts.
We manage the financial exposure to fluctuations in the
cost of fuels used in production by:
• Entering into long-term contracts that specify the price at
which fuel is to be supplied to our facilities;
• Hedging emissions costs by entering
into various
emission trading arrangements; and
• Selectively using hedges, where available, to set prices
for fuel.
In 2023, 86 per cent (2022 – 82 per cent) of our gas
consumption used
in generating electricity was
contractually fixed or passed through to our customers and
100 per cent (2022 – 100 per cent) of our purchased coal
was contractually fixed.
Actual variations in net earnings (loss) can vary from
calculated sensitivities and may not be linear due to
optimization opportunities, co-dependencies and cost
mitigations, production, availability and other factors.
Natural Gas Supply and Price Risk
Having sufficient natural gas and natural gas transportation
services available at our gas facilities is essential to
maintaining the reliability and availability of those facilities.
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TransAlta Corporation 2023 Integrated Report
events, work
Ensuring adequate pipeline transportation service and
natural gas supply for our gas units may be impacted by,
among other things, the timing of receiving regulatory and
other approvals for firm transportation commitments,
weather-related
system
maintenance, variability in pipeline hydraulics pressure and
flows and impacts due to other naturally caused events.
Pricing of natural gas is driven by market supply and
demand fundamentals for natural gas in North America and
globally. We are exposed to changes in natural gas prices,
which may impact the profitability of our facilities and how
the facilities are dispatched into the market.
stoppages,
We manage gas supply and price risk by:
• Working to ensure that we have at least two pipelines
supplying the gas used in electrical generation in Alberta;
• Contracting for firm gas delivery and supply;
• Monitoring the financial viability of gas producers
and pipelines;
• Hedging gas price exposure; and
• Monitoring pipeline maintenance
schedules
and
transportation availability.
Environmental Compliance Risk
Environmental compliance risks are risks to our business
associated with existing and/or changes in environmental
regulations. New emission reduction objectives for the
power sector are being established by governments in
Canada, Australia and the US. We anticipate continued and
growing scrutiny by investors and other stakeholders
relating to sustainability performance. These changes to
regulations may affect our earnings by reducing the
imposing
operating
additional costs on the generation of electricity through
such measures as emission caps or taxes, requiring
additional capital
in emission abatement
technology or requiring us to invest in offset credits. It is
anticipated that these compliance costs will increase due
to
to
environmental concerns.
life of generating
facilities and
investments
increased
attention
political
public
and
We manage environmental compliance risk by:
• Seeking
continuous
numerous
performance metrics such as emissions, safety, land and
water impacts and environmental incidents;
improvement
in
• Conducting
environmental
safety
management system audits to assess conformance to
our Total Safety Management System, which is designed
to continuously improve performance;
health
and
• Committing significant experienced resources to work
with regulators in Canada, Australia and the US to
advocate that regulatory changes are well-designed and
cost-effective;
• Developing compliance plans that address how to meet
or surpass emission standards for GHG, mercury, SO2
and NOx, which will be adjusted as
regulations
are finalized;
• Purchasing carbon emissions reduction offsets or credits;
• Investing in renewable energy projects, such as wind,
storage
generation
hydro
and
solar
technologies; and
and
• Incorporating change-in-law provisions in contracts that
from
recovery of certain compliance costs
allow
our customers.
We are committed to remaining in compliance with all
environmental regulations relating to operations and
facilities. Compliance with both regulatory requirements
and management system standards is regularly audited
through our performance assurance policy and results are
reported to the GSSC.
Credit Risk
Credit risk is the risk to our business associated with
changes in the creditworthiness of entities with which we
have commercial exposures. This risk results from the
ability of a counterparty to either fulfil its financial or
performance obligations to us or where we have made a
payment in advance of the delivery of a product or service.
The inability to collect cash due to us or to receive
products or services may have an adverse impact upon our
net earnings (loss) and cash flows.
We manage our exposure to credit risk by:
• Establishing and adhering to policies that define credit
limits based on the creditworthiness of counterparties;
• contract term limits and the credit concentration with any
specific counterparty;
• Requiring formal sign-off on contracts that
include
commercial, financial, legal and operational reviews;
Trade and other receivables(1,2)
Long-term finance lease receivables
Risk management assets(1)
Loan receivable(2)
Total
• Requiring security
instruments, such as parental
guarantees, letters of credit and cash collateral or third-
party credit insurance if a counterparty goes over its
limits. Such security instruments can be collected if a
counterparty fails to fulfil its obligation; and
• Reporting our exposure using a variety of methods that
allow key decision-makers to assess credit exposure by
counterparty. This reporting allows us to assess credit
limits for counterparties and the mix of counterparties
based on their credit ratings.
If established credit exposure limits are exceeded, we take
steps to reduce this exposure, such as by requesting
collateral, if applicable, or by halting commercial activities
with the affected counterparty. However, there can be no
assurances that we will be successful in avoiding losses as
result of a contract counterparty not meeting
a
its obligations.
As needed, additional risk mitigation tactics will be taken to
reduce the risk to TransAlta. These risk mitigation tactics
may include, but are not limited to, immediate follow-up on
overdue amounts, adjusting payment terms to ensure a
portion of funds are received sooner, requiring additional
collateral, reducing transaction terms and working closely
with impacted counterparties on negotiated solutions.
Our credit risk management profile and practices have not
changed materially from Dec. 31, 2022. We had no material
counterparty losses in 2023. We continue to keep a close
watch on changes and trends in the market and the impact
these changes could have on our energy trading business
and hedging activities and will take appropriate actions as
required, although no assurance can be given that we will
always be successful.
The following table outlines our maximum exposure to
credit risk without taking into account collateral held or
right of set-off, including the distribution of credit ratings,
as at Dec. 31, 2023:
Investment
grade
(per cent)
Non-investment
grade
(per cent)
Total
(per cent)
95
100
75
—
5
—
25
100
100
100
100
100
Total
amount
($)
807
171
203
26
1,207
(1) Letters of credit and cash and cash equivalents are the primary types of collateral held as security related to these amounts.
(2)
Includes $26 million loan receivable included within other assets with a counterparty that has no external credit rating.
The maximum credit exposure to any one customer for
commodity trading operations, including the fair value of
open trading positions net of any collateral held, is $23
million (2022 – $64 million).
Counterparties enter into certain electricity and natural gas
purchase and sale contracts for the purposes of asset-
backed sales and proprietary trading. The terms and
conditions of these contracts require the counterparties to
TransAlta Corporation 2023 Integrated Report
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provide collateral when the fair value of the obligation
pursuant to these contracts is in excess of any credit limits
granted. Downgrades in creditworthiness by certain credit
rating agencies may impact our ability to enter into these
contracts or any ordinary course contract, decrease the
credit limits granted and increase the amount of collateral
that may have to be provided. Certain existing contracts
contain credit rating contingent clauses, that, when
triggered, automatically increase costs under the contract
or require additional collateral to be posted. Where the
contingency is based on the lowest single rating, a one-
level downgrade from a credit rating agency with an
originally higher rating may not, however, trigger additional
direct adverse impact.
Currency Rate Risk
from
We have exposure to various currencies as a result of our
investments and operations in foreign jurisdictions, the
the acquisition of
earnings
equipment and
foreign-denominated
commodities from foreign suppliers, and our US and
Australian dollar-denominated debt. Our exposures are
primarily to the US and Australian currencies. Changes in
those operations,
services and
the values of these currencies in relation to the Canadian
dollar may affect our earnings, cash flows or the value of
our foreign investments to the extent that these positions
or cash flows are not hedged or the hedges are ineffective.
We manage our currency rate risk by establishing and
adhering to policies that include:
• Hedging our net investments in US operations using US-
denominated debt;
• Entering into forward foreign exchange contracts to
hedge
expenditures
including our US-denominated senior debt that is outside
the net investment portfolio; and
foreign-denominated
future
• Hedging our expected foreign operating cash flows. Our
target is to hedge a minimum of 60 per cent of our
forecasted foreign operating cash flows over a four-year
period, with a minimum of 90 per cent in the current year,
70 per cent in the next year, 50 per cent in the third year
and 30 per cent in the fourth year. The US and Australian
exposure, net of debt service and sustaining capital
foreign
expenditures,
exchange contracts.
is managed with
forward
The sensitivity of our net earnings to changes in foreign exchange rates has been prepared using management’s
assessment that an average $0.03 increase or decrease in the US or Australian currencies relative to the Canadian dollar
is a reasonable potential change over the next quarter and is shown below:
Factor
Exchange rate
Liquidity Risk
Liquidity risk relates to our ability to access capital to be
used to fund capital projects, refinance debt and pay
liabilities, engage in trading and hedging activities and
general corporate purposes. Credit ratings facilitate these
activities and changes in credit ratings may affect our
ability and/or the cost of accessing capital markets, or
establishing normal course derivative or hedging
transactions, including those undertaken by our Energy
Marketing segment.
We continue to focus on maintaining our financial position
and flexibility. Credit ratings issued for TransAlta, as well as
the corresponding rating agency outlooks, are set out in
the Financial Capital section of this MD&A. Credit ratings
are subject to revision or withdrawal at any time by the
rating organization and there can be no assurance that
TransAlta’s credit ratings and the corresponding outlook
will not be changed, resulting in the adverse possible
impacts identified above.
Increase or
decrease
$0.03
Approximate impact
on net earnings
(millions)
$14
As at Dec. 31, 2023, we had liquidity of $1.7 billion
comprising undrawn amounts under our committed credit
facilities and cash on hand net of bank overdraft.
We manage liquidity risk by:
• Preparing and revising longer-term financing plans to
in business plans and the market
reflect changes
availability of capital;
• Reporting liquidity risk exposure and risk management
activities on a regular basis to the Commodity Risk &
Compliance Committee,
senior management and
the AFRC;
• Maintaining a strong balance sheet;
• Maintaining sufficient undrawn committed credit lines to
support potential liquidity requirements; and
• Monitoring trading positions.
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TransAlta Corporation 2023 Integrated Report
Interest Rate Risk
Changes in interest rates can impact our borrowing
costs. Changes in our cost of capital may also affect the
feasibility of new growth initiatives.
We manage interest rate risk by establishing and adhering
to policies that include:
• Employing a combination of fixed and floating rate
debt instruments;
• Monitoring the mixture of floating and fixed rate debt and
adjusting to ensure efficiency; and
• Opportunistically hedging probable debt issuances and
interest
outstanding variable rate borrowings using
rate swaps.
At Dec. 31, 2023, approximately 14 per cent (2022 – nine
per cent) of our total long-term debt was subject to
changes in floating interest rates through a combination of
floating rate debt and interest rate swaps.
The sensitivity of changes in interest rates upon our net earnings is shown below:
Factor
Interest rate
London
impact
Interbank Offered Rate reform could
interest rate risk with respect to the Company's Canadian
dollar credit facilities and the Poplar Creek non-recourse
bond held by a TransAlta subsidiary. The facilities
reference the Canadian Dollar Offer Rate ("CDOR") for
Canadian-dollar drawings, but include appropriate fallback
language to replace this benchmark rate in the event of a
benchmark transition. In addition, the non-recourse bond
references the three-month CDOR. Cessation of the three-
month CDOR will occur on June 28, 2024, which will
impact the facilities and the non-recourse bond.
Coal Supply Risk
required
fuel available when
Having sufficient
for
generation is essential to maintaining our ability to produce
electricity under contracts and
for merchant sale
opportunities. At Centralia, interruptions at our supplier’s
mine, the availability of trains to deliver coal and the
financial viability of our coal suppliers could affect our
ability to generate electricity.
We manage coal supply risk by:
• Sourcing the coal used at Centralia from different mine
sources to ensure sufficient coal is available at a
competitive cost;
• Contracting sufficient
trains
to deliver
the coal
requirements at Centralia;
• Ensuring coal inventories on hand at Centralia are at
appropriate levels for usage requirements;
• Ensuring efficient coal handling and storage facilities are
in place so that the coal being delivered can be
processed in a timely and efficient manner;
• Monitoring and maintaining coal specifications and
carefully matching the specifications mined with the
requirements of our facilities;
• Monitoring
the
financial
viability
of Centralia
suppliers; and
Increase or
decrease
(per cent)
Approximate impact
on net earnings
(millions)
50 bps
$2
• Hedging
diesel
exposure
in
mining
and
transportation costs.
Project Management Risk
On capital projects, we face risks associated with cost
overruns, delays and performance.
We manage project risks by:
• Ensuring all projects
processes and policies;
follow established corporate
• Identifying key risks during every stage of project
development and ensuring mitigation plans are factored
into capital estimates and contingencies;
• Reviewing project plans, key assumptions and returns
of
senior management
to Board
prior
with
Director approvals;
• Consistently
applying
project
management
methodologies and processes;
• Determining contracting strategies that are consistent
with the project scope and scale to ensure key risks,
such as
labour and technology, are managed by
contractors and equipment suppliers;
• Ensuring contracts for construction and major equipment
include key terms for performance, delays and quality
backed by appropriate levels of liquidated damages;
• Reviewing projects after achieving commercial operation
to ensure learnings are incorporated into the next project;
• Negotiating contracts
for construction and major
equipment to lock in key terms such as price, availability
of long lead equipment, foreign currency rates and
warranties as much as is economically feasible before
proceeding with the project; and
• Entering into labour agreements to provide security
around labour cost, supply and productivity.
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Human Resource Risk
Human resource risk relates to the potential impact upon
our business as a result of changes in the workplace.
Human resource risk can occur in several ways:
• Potential disruption as a result of labour action at our
generating facilities;
• Reduced productivity due to turnover in positions;
• Inability to complete critical work due to vacant positions;
• Failure to maintain fair compensation with respect to
market rate changes; and
• Reduced competencies due to insufficient training, failure
to transfer knowledge from existing employees or
insufficient expertise within current employees.
We manage this risk by:
• Possessing a labour relations strategy;
• Applying a human-centric approach that emphasizes the
employee experience, including actively improving our
workplace culture, focusing on ED&I strategies and
offering health and wellness programming and initiatives;
• Focusing on employee learning and development;
• Monitoring industry compensation and aligning salaries
with those benchmarks;
• Using
incentive pay to align employee goals with
corporate goals;
• Monitoring and managing target levels of employee
turnover; and
• Ensuring employees have the appropriate training and
qualifications to perform their jobs.
In 2023, approximately 30 per cent (2022 – 31 per cent) of
our labour force was covered by 11 collective bargaining
agreements (2022 – 11).
In 2023, we successfully
renegotiated three (2022 – six) collective bargaining
agreements. Of these three agreements, one agreement is
for a three-year duration, one agreement is for a two-year
duration and one agreement is a one-year duration. We
expect
collective bargaining
agreements in 2024. Any problems in negotiating these
collective bargaining agreements could lead to higher
employee costs and a work stoppage or strike, which could
have a material adverse effect on us.
renegotiate
five
to
Regulatory and Political Risk
to
Regulatory and political risk is the risk to our business
associated with potential changes
the existing
regulatory structures and the political influence upon those
structures within each of the jurisdictions in which we
operate. This risk can come from market regulation and re-
regulation, increased oversight and control, structural or
design changes in markets, or other unforeseen influences.
Market rules are often dynamic and we are not able to
predict whether there will be any material changes in the
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TransAlta Corporation 2023 Integrated Report
regulatory environment or the ultimate effect of changes in
the regulatory environment on our business. This risk
includes, among other things, uncertainties associated with
the development of carbon pricing policies and funding.
We manage these risks systematically through our legal
and regulatory groups and our compliance program,
which is reviewed periodically to ensure its effectiveness.
We also work with governments, regulators, electricity
system operators and other stakeholders to resolve issues
as they arise. We are actively monitoring changes to
market rules and market design and we engage in industry
and government-agency-led stakeholder engagement
processes. Through these and other avenues, we engage
in advocacy and policy discussions at a variety of levels.
These stakeholder consultations have allowed us to
engage in proactive discussions with governments and
regulatory agencies over the longer term.
International investments are subject to unique risks and
uncertainties relating to the political, social and economic
structures of the respective country and such country’s
regulatory regime. We mitigate this risk through the use of
non-recourse financing and insurance.
Transmission Risk
risks associated with
Access to transmission lines and transmission capacity for
existing and new generation is key to our ability to deliver
energy produced at our power facilities to our customers.
The
transmission
in the markets where we operate are
infrastructure
increasing because new connections to the power system
are consuming transmission capacity faster than it is being
added by new transmission developments.
the aging
Reputation Risk
Our reputation is one of our most valued assets. Reputation
risk relates to the risk associated with our business
because of changes in opinion from the general public,
private
and
other entities.
stakeholders, governments,
financiers
We manage reputation risk by:
• Striving as a neighbour and business partner, in the
regions where we operate, to build viable relationships
based on mutual understanding leading to workable
solutions
other
our
community stakeholders;
neighbours
with
and
• Clearly communicating our business objectives and
priorities to a variety of stakeholders on a routine and
transparent basis;
• Applying
innovative
technologies
to
environment
improve our
and
operations,
environmental footprint;
work
• Maintaining positive relationships with various levels
of government;
• Pursuing sustainable development as a
longer-term
corporate strategy;
• Ensuring that each business decision is made with
integrity and in line with our corporate values;
• Communicating the impact and rationale of business
decisions to stakeholders in a timely manner; and
• Maintaining strong corporate values
that support
reputation risk management initiatives, including the
annual Code of Conduct sign-off.
Corporate Structure Risk
We conduct a significant amount of business through
subsidiaries and partnerships. Our ability to meet and
service debt obligations is dependent upon the results of
operations of our subsidiaries and partnerships and the
payment of funds by our subsidiaries and partnerships in
the form of distributions, loans, dividends or otherwise. In
addition, our subsidiaries and partnerships may be subject
to statutory or contractual restrictions that limit their ability
to distribute cash to us.
Cybersecurity Risk
We rely on our information technology to process, transmit
and store electronic information and data used for the safe
operation of our assets. Over the past few years,
geopolitical tensions and the pandemic have significantly
impacted the cybersecurity ecosystem, increasing the
frequency and diversity of cyberattacks, including threats
of war driven cyberattacks (i.e., terrorism) against critical
infrastructure and threat actors taking advantage of the
(e.g., charity scams) and hybrid working
pandemic
environments. We anticipate
threat
that
landscape will continue to evolve, with increasing threats
of ransomware, compromised insider threats, supply chain
attacks, advanced
targeted phishing and artificial
intelligence.
the cyber
Cyber threats originate from various sources and vectors,
from nation states, organized hacking groups or malware/
ransomware. The cyber threat landscape continues to
evolve, as we see cyber threats shift their focus from
information
traditional
technology systems, to more effective attacks, such as
phishing and ransomware.
perimeter
attacks
against
TransAlta has established a comprehensive cybersecurity
program to manage cybersecurity risks through effective
security practices and structured and tailored plans. As
information technology /operation technology systems are
integral to TransAlta’s business operations, the risk of a
cybersecurity incident threatens the safety of the public,
TransAlta personnel and/or business functions, service
delivery, reputation and profitability.
TransAlta maintains compliance to regulatory, legislative,
and business requirements (e.g., NERC CIP, SOX, Privacy)
by adopting industry endorsed standards and frameworks
(e.g., National Institute of Standards and Technology
implement a
(“NIST”), CIP/Reliability Standards)
pragmatic
program,
implementing cybersecurity controls and processes under
the following domains:
fit-for-purpose
cybersecurity
to
• Identify: TransAlta
risk
conducts
assessments to identify and document the organization's
assets, systems and data, as well as potential risks
and vulnerabilities.
comprehensive
• Protect: TransAlta implements security controls, policies
and procedures to safeguard the organization's assets,
systems and data from unauthorized access, use,
disclosure, disruption, modification or destruction. This
includes
implementing access controls, encryption,
firewalls and intrusion detection/prevention systems to
protect the organization's networks and systems.
• Detect: TransAlta implements incident detection and
response capabilities to detect and respond to cyber
incidents. This includes monitoring systems, networks
and data for suspicious activity.
• Respond: TransAlta has developed incident response
plans, procedures and teams, as well as provided training
and conducted exercises to ensure that these plans and
procedures are operating effectively.
• Recover: TransAlta has developed disaster recovery and
business continuity plans, and it conducts test exercises
of these plans to ensure their effectiveness. This includes
identifying critical systems, data and process to ensure
the continuity of business operations, as well as
implementing backup and recovery solutions to ensure
that the organization's data can be restored in the event
of a disaster.
Although complete cyber risk elimination is not achievable
given the evolving cyber threat landscape, the security
controls implemented to detect, prevent and respond to a
cyber incident significantly reduce TransAlta’s cyber risk
and potential incident impact to acceptable levels. In
addition, cyber insurance is utilized to further manage and
transfer residual cyber risk to TransAlta’s business. We
continue to improve our overall security maturity and
defense capabilities against cyber threats and align
cybersecurity practices to industry standards, business
objectives and regulatory compliance requirements.
General Economic Conditions
Changes in general economic conditions impact product
demand, revenue, operating costs, the timing and extent of
capital expenditures, the net recoverable value of PP&E,
and
financing
counterparty risk.
liquidity
costs,
credit
and
risk
TransAlta Corporation 2023 Integrated Report
M123
Growth Risk
Our business plan includes targets for the growth of our
fleet of generating assets through suitable acquisitions or
contracting new build opportunities. There can be no
assurance that we will be able to identify attractive growth
opportunities in the future, that we will be able to complete
growth opportunities that increase the amount of cash
available for distribution, or that growth opportunities will
be successfully integrated into our existing operations. The
successful execution of the growth strategy requires
careful timing and business judgment, as well as the
resources to complete the due diligence and evaluation of
such opportunities and to acquire and successfully
integrate those assets into our business.
Income Taxes
in several
Our operations are complex and
countries. The computation of the provision for income
regulations and
taxes
interpretations,
involves
located
tax
Factor
Tax rate
legislation that are constantly evolving. Our tax filings are
subject to audit by taxation authorities. Management
believes that it has adequately provided for income taxes
as required by the Income Tax Act and IFRS, based on all
information currently available.
The Company and its subsidiaries are subject to changing
laws, treaties and regulations in and between countries.
Various tax proposals in the countries we operate in could
result in changes to the basis on which deferred taxes are
calculated or could result in changes to income or non-
income tax expense. There has recently been an increased
focus on issues related to the taxation of multinational
corporations. A change in tax laws, treaties or regulations,
or in the interpretation thereof, could result in a materially
higher income or non-income tax expense that could have
a material adverse impact on the Company.
The sensitivity of changes in income tax rates upon our net
earnings is shown below:
Increase or
decrease
(per cent)
Approximate impact
on net earnings
(millions)
1
$9
Legal Contingencies
Other Contingencies
level of
We maintain a
insurance coverage deemed
appropriate by management. There were no significant
changes to our insurance coverage during renewal of the
insurance
insurance policies on Dec. 31, 2023. Our
coverage may not be available
future on
the
terms. There can be no
commercially
insurance coverage will be fully
assurance that our
adequate to compensate for potential losses incurred. In
the event of a significant economic event, the insurers may
not be capable of fully paying all claims. All insurance
policies are subject to standard exclusions.
reasonable
in
We are occasionally named as a party in various disputes,
claims and legal or regulatory proceedings that arise during
the normal course of our business. We review each of
these claims, including the nature and merits of the claim,
the amount in dispute or the remedy claimed and the
availability of
insurance coverage. There can be no
assurance that any particular dispute, claim or proceeding
will be resolved in our favour or our liabilities with respect
to such claims will not have a material adverse effect on us
or our business, operations or financial results. Refer to the
Other Consolidated Analysis section of this MD&A for
further details.
M124
TransAlta Corporation 2023 Integrated Report
Disclosure Controls and Procedures
is
responsible
internal control over
for establishing and
Management
financial
maintaining adequate
reporting (‘‘ICFR’’) and disclosure controls and procedures
(“DC&P’’). During the year ended Dec. 31, 2023, the
majority of our workforce supporting and executing our
ICFR and DC&P continue to work on a hybrid basis. The
Company has
implemented appropriate controls and
oversight for both in-office and remote work. There has
been minimal impact to the design and performance of our
internal controls.
ICFR is a framework designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of the consolidated financial statements for
external purposes in accordance with IFRS. Management
has used the Internal Control – Integrated Framework
issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) in order to
assess the effectiveness of the Company’s ICFR.
DC&P refer to controls and other procedures designed to
ensure that information required to be disclosed in the
reports we file or submit under securities legislation is
recorded, processed, summarized and reported within the
time frame specified in applicable securities legislation.
DC&P include, without limitation, controls and procedures
designed to ensure that
information required to be
disclosed by us in our reports that we file or submit under
is accumulated and
legislation
applicable securities
communicated
including our Chief
to management,
Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding our
required disclosure.
Together, the ICFR and DC&P frameworks provide internal
control over financial reporting and disclosure. In designing
and evaluating our
ICFR and DC&P, management
recognizes that any controls and procedures, no matter
how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives and as such may not prevent or detect all
misstatements and management is required to apply its
judgment in evaluating and implementing possible controls
and procedures. Further, the effectiveness of ICFR is
subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of
compliance with policies or procedures may change.
Management has evaluated, with the participation of our
Chief Executive Officer and Chief Financial Officer, the
effectiveness of our ICFR and DC&P as of the end of the
period covered by this MD&A. Based on the foregoing
evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as at Dec. 31, 2023, the end
of the period covered by this MD&A, our ICFR and DC&P
were effective.
TransAlta Corporation 2023 Integrated Report
M125
Consolidated Financial Statements
Management's Report
To the Shareholders of TransAlta Corporation
by management.
The Consolidated Financial Statements and other financial
information included in this annual report have been
prepared
is management’s
responsibility to ensure that sound judgment, appropriate
accounting principles and methods, and
reasonable
estimates have been used to prepare this information.
They also ensure
information presented
is consistent.
that all
It
Management is also responsible for establishing and
maintaining internal controls and procedures over the
financial reporting process. The internal control system
includes an internal audit function and an established
business conduct policy that applies to all employees. In
addition, TransAlta Corporation ("TransAlta") has a code of
conduct that applies to all employees and is signed
annually. The Corporate Code of Conduct can be viewed
on TransAlta’s website (www.transalta.com). Management
believes the system of internal controls, review procedures
and established policies provides reasonable assurance as
to the reliability and relevance of financial reports.
Management also believes that TransAlta’s operations are
conducted in conformity with the law and with a high
standard of business conduct.
The Board of Directors (the “Board”) is responsible for
ensuring that management fulfils its responsibilities for
financial reporting and internal controls. The Board carries
out its responsibilities principally through its Audit, Finance
and Risk Committee (the “Committee”). The Committee,
which consists solely of independent directors, reviews the
financial statements and annual report and recommends
them to the Board for approval. The Committee meets with
management, internal auditors and external auditors to
discuss internal controls, auditing matters and financial
reporting issues. Internal and external auditors have full
and unrestricted access to the Committee. The Committee
also recommends the firm of external auditors to be
appointed by the shareholders.
John Kousinioris
Todd Stack
President and Chief Executive Officer
Executive Vice President, Finance and
Chief Financial Officer
February 22, 2024
F1
TransAlta Corporation 2023 Integrated Report
Management’s Annual Report on Internal Control Over
Financial Reporting
To the Shareholders of TransAlta Corporation
The following report is provided by management in respect
of TransAlta Corporation’s (“TransAlta” or the "Company")
internal control over financial reporting (as defined in
Rules 13a-15f and 15d-15f under the United States
Securities Exchange Act of 1934 and National Instrument
52-109 Certification of Disclosure in Issuers' Annual and
Interim Filings).
TransAlta’s management is responsible for establishing and
maintaining adequate
financial
reporting for TransAlta.
internal control over
Management has used the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) 2013
framework to evaluate the effectiveness of TransAlta’s
internal control over financial reporting. Management
believes that the COSO 2013 framework is a suitable
framework for its evaluation of TransAlta’s internal control
over financial reporting because it is free from bias, permits
and quantitative
reasonably
measurements of TransAlta’s
is
sufficiently complete so that those relevant factors that
would alter a conclusion about the effectiveness of
TransAlta’s internal controls are not omitted and is relevant
to an evaluation of internal control over financial reporting.
consistent qualitative
internal controls,
Internal control over financial reporting cannot provide
absolute assurance of achieving
reporting
objectives because of its inherent limitations. Internal
controls over financial reporting are processes that involve
human diligence and compliance and are subject to lapses
in judgment and breakdowns resulting from human failures.
financial
is a
there
limitations,
Internal control over financial reporting can also be
circumvented by collusion or improper overrides. Because
of such
that material
misstatements may not be prevented or detected on a
timely basis by internal control over financial reporting.
However, these inherent limitations are known features of
the financial reporting process and it is possible to design
safeguards
into the process to reduce, though not
eliminate, this risk.
risk
International
TransAlta proportionately consolidates the joint operations
of the Sheerness Generating Station and equity accounts
for our investment in SP Skookumchuck Investment, LLC in
accordance with
Financial Reporting
Standards. Management does not have the contractual
ability to assess the internal controls of these joint
arrangements and associates. Once
financial
information is obtained from these joint arrangements and
associates it falls within the scope of TransAlta’s internal
controls framework. Management’s conclusion regarding
the effectiveness of internal controls does not extend to
the internal controls at the transactional level of these joint
arrangements and associates.
the
Included in the 2023 Consolidated Financial Statements of
TransAlta for
joint operations and equity accounted
investments are three per cent and 12 per cent of
the Company's total and net assets, respectively, as of
Dec. 31, 2023, and seven per cent and 16 per cent of the
Company's revenues and net earnings, respectively.
TransAlta Corporation
2023 Integrated Report
F2
Changes in Internal Control over Financial Reporting
There has been no change in the Company's internal
control over financial reporting that occurred during the
year covered by this Annual Report that has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
Management has assessed the effectiveness of TransAlta’s
internal control over financial reporting, as at Dec. 31, 2023
and has concluded that such internal control over financial
reporting was effective.
Ernst & Young LLP, who has audited the Consolidated
Financial Statements of TransAlta for the year ended Dec.
31, 2023, has also issued a report on internal control over
financial
the
Public Company Accounting Oversight Board (United
States). This report is located on the following page of this
Annual Report.
reporting under
standards of
the
John Kousinioris
Todd Stack
President and Chief Executive Officer
Executive Vice President, Finance and
Chief Financial Officer
February 22, 2024
F3
TransAlta Corporation 2023 Integrated Report
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of TransAlta Corporation
Opinion on Internal Control Over Financial Reporting
We have audited TransAlta Corporation’s internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, TransAlta Corporation (the “Company”)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on
the COSO criteria.
As indicated in the accompanying Management’s Annual Report on Internal Control over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not
include the internal controls of the joint operations of the Sheerness Generating Station and equity accounted joint
venture of SP Skookumchuck Investment, LLC which are included in the 2023 consolidated financial statements of the
Company and constituted 3% and 12% of total and net assets, respectively, as of December 31, 2023, and 7% and 16% of
revenues and net earnings, respectively, for the year then ended. Our audit of internal control over financial reporting of
the Company also did not include an evaluation of the internal control over financial reporting of the joint operations of the
Sheerness Generating Station and equity accounted joint venture of SP Skookumchuck Investment, LLC.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated statements of financial position of TransAlta Corporation as of December 31, 2023
and 2022, the related consolidated statements of earnings (loss), comprehensive income (loss), changes in equity and
cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report
dated February 22, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
TransAlta Corporation
2023 Integrated Report
F4
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/Ernst & Young LLP
Chartered Professional Accountants
Calgary, Canada
February 22, 2024
F5
TransAlta Corporation 2023 Integrated Report
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of TransAlta Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of TransAlta Corporation (the
“Company”) as of December 31, 2023 and 2022, the related consolidated statements of earnings (loss), comprehensive
income (loss), changes in equity and cash flows, for each of the three years in the period ended December 31, 2023, and
the related notes (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023
and 2022, and the financial performance and its cash flows for each of the three years in the period ended December 31,
2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards
Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (“COSO”), and our report dated February 22, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company‘s management. Our responsibility is to
express an opinion on the Company‘s consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
TransAlta Corporation
2023 Integrated Report
F6
Valuation of Long-Lived Assets related to certain cash generating units (“CGU”s) and Goodwill related to the Wind & Solar segment
Description of
the Matter
As disclosed in notes 2(G), 2(H), 2(P)(I), 7 and 21 of the consolidated financial statements, the Company owns
significant Wind & Solar generation assets and has recognized goodwill from historical acquisitions which must be
tested for impairment at least annually or when indicators of impairment are present. The carrying value of Goodwill
related to the Wind & Solar segment as at December 31, 2023 was $176 million and the recoverable amount of long-
lived assets in the Wind & Solar segment that had indicators of impairment or impairment reversal during the year was
$670 million.
How We
Addressed the
Matter in Our
Audit
Determining the recoverable amounts for the Wind & Solar segment for the purposes of the goodwill impairment test
and of certain CGUs in the Wind & Solar segment with indicators of impairment or impairment reversal (“Wind & Solar
CGUs”) for the asset impairment test was identified as a critical audit matter due to the significant estimation
uncertainty and judgment applied by management in determining the recoverable amount, primarily due to the
sensitivity of the significant assumptions to the future cash flows and the effect that changes in these assumptions
would have on the recoverable amount. The estimates with a high degree of subjectivity include electricity production,
sales prices, cost inputs, and determining the appropriate discount rate.
We obtained an understanding of management’s process for estimating the recoverable amount of the Wind & Solar
segment and the Wind & Solar CGUs. We evaluated the design and tested the operating effectiveness of controls over
the Company’s processes to determine the recoverable amount. Our audit procedures to test the Company’s
recoverable amount of the Wind & Solar segment and the Wind & Solar CGUs with indicators of impairment or
impairment reversal included, among others, comparing the significant assumptions used to estimate cash flows to
current contracts with external parties and historical trends and obtaining historical electricity generation data to
evaluate future electricity production forecasts. We assessed the historical accuracy of management’s forecasts by
comparing them with actual results and performed a sensitivity analysis to evaluate the assumptions that were most
significant to the determination of the recoverable amount. We evaluated the Company’s determination of future sales
prices by comparing them to externally available third-party future electricity price estimates. We also involved our
internal valuation specialist to assist in our evaluation of the discount rates, which involved benchmarking the inputs
against available market data.
Valuation of Level III Derivative Instruments
Description of
the Matter
As disclosed in notes 2(P)(IV), 14 and 25 of the consolidated financial statements, the Company enters into
transactions that are accounted for as derivative financial instruments and are recorded at fair value. The valuation of
derivative instruments classified as level III are determined using assumptions that are not readily observable. As at
December 31, 2023 the fair value of the Company’s derivative financial instruments classified as level III was a $147
million net risk management liability.
Auditing the determination of fair value of level III derivative instruments that rely on significant unobservable inputs
can be complex and relies on judgments and estimates concerning future prices, discount rates, credit value
adjustments, liquidity and delivery volumes, and can fluctuate significantly depending on market conditions. Therefore,
such determination of fair value was identified as a critical audit matter.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding of the Company’s processes and we evaluated and tested the design and operating
effectiveness of internal controls addressing the determination and review of inputs used in establishing level III fair
values. Our audit procedures included, among others, testing a sample of level III derivative instrument internal models
used by management and evaluating the significant assumptions utilized. We also compared management's future
pricing assumptions, credit value adjustments, and liquidity assumptions to third-party data as well as comparing terms
such as delivery volumes and timing to executed commodity contracts. We compared the delivery volume assumptions
to historical information. We performed a sensitivity analysis to evaluate assumptions including future commodity
prices, delivery volumes and discount rates. For a sample of level III derivative instruments, we involved our internal
valuation specialist to assist in our evaluation of the appropriateness of the fair value by evaluating the key
assumptions and methodologies.
/s/Ernst & Young LLP
Chartered Professional Accountants
We have served as auditors of TransAlta Corporation and its predecessor entities since 1947.
Calgary, Canada
February 22, 2024
F7
TransAlta Corporation 2023 Integrated Report
Consolidated Statements of Earnings (Loss)
(in millions of Canadian dollars except where noted)
Year ended Dec. 31
Revenues (Note 5)
Fuel and purchased power (Note 6)
Carbon compliance (Note 16)
Gross margin
Operations, maintenance and administration (Note 6)
Depreciation and amortization
Asset impairment charges (reversals) (Note 7)
Taxes, other than income taxes
Net other operating (income) loss (Note 8)
Operating income (loss)
Equity income (Note 9)
Finance lease income
Interest income
Interest expense (Note 10)
Foreign exchange gain (loss)
Gain on sale of assets and other
Earnings (loss) before income taxes
Income tax expense (Note 11)
Net earnings (loss)
Net earnings (loss) attributable to:
TransAlta shareholders
Non-controlling interests (Note 12)
Net earnings (loss) attributable to TransAlta shareholders
Preferred share dividends (Note 28)
Net earnings (loss) attributable to common shareholders
Weighted average number of common shares outstanding in the year (millions)
2023
3,355
1,060
112
2,183
539
621
(48)
29
(47)
1,089
4
12
59
(281)
(7)
4
880
84
796
695
101
796
695
51
644
276
2022
2,976
1,263
78
2021
2,721
1,054
178
1,635
1,489
521
599
9
33
(58)
531
9
19
24
511
529
648
32
8
(239)
9
25
11
(286)
(256)
4
52
353
192
161
50
111
161
50
46
4
271
16
54
(380)
45
(425)
(537)
112
(425)
(537)
39
(576)
271
Net earnings (loss) per share attributable to common shareholders, basic
and diluted (Note 27)
2.33
0.01
(2.13)
See accompanying notes.
TransAlta Corporation
2023 Integrated Report
F8
Consolidated Statements of Comprehensive Income (Loss)
(in millions of Canadian dollars)
Year ended Dec. 31
Net earnings (loss)
Other comprehensive income (loss)
Net actuarial gains (losses) on defined benefit plans, net of tax(1)
Fair value loss on third-party investments, net of tax (Note 9)
Total items that will not be reclassified subsequently to net earnings (loss)
Gains (losses) on translating net assets of foreign operations, net of tax
Gains (losses) on financial instruments designated as hedges of foreign
operations, net of tax(2)
Gains (losses) on derivatives designated as cash flow hedges, net of tax(3)
Reclassification of (gains) losses on derivatives designated as cash flow
hedges to net earnings (loss), net of tax(4)
Total items that will be reclassified subsequently to net earnings (loss)
Other comprehensive income (loss)
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
TransAlta shareholders
Non-controlling interests (Note 12)
2023
796
2022
2021
161
(425)
(5)
—
(5)
(6)
9
41
58
102
97
893
817
76
893
37
(1)
36
21
(25)
(556)
100
(460)
(424)
(263)
37
—
37
(14)
—
(200)
(8)
(222)
(185)
(610)
(318)
(693)
55
(263)
83
(610)
(1) Net of income tax recovery of $1 million for the year ended Dec. 31, 2023 (2022 – $12 million expense, 2021 – $11 million expense).
(2) Net of income tax expense of $1 million for the year ended Dec. 31, 2023 (2022 – $3 million recovery, 2021 – nil).
(3) Net of income tax expense of $10 million for the year ended Dec. 31, 2023 (2022 – $138 million recovery, 2021 – $55 million recovery).
(4) Net of reclassification of income tax expense of $17 million for the year ended Dec. 31, 2023 (2022 – $26 million expense, 2021 – $2 million recovery).
See accompanying notes.
F9
TransAlta Corporation 2023 Integrated Report
Consolidated Statements of Financial Position
(in millions of Canadian dollars)
As at Dec. 31
Current assets
Cash and cash equivalents
Restricted cash (Note 24)
Trade and other receivables (Note 13)
Prepaid expenses and other
Risk management assets (Note 14 and 15)
Inventory (Note 16)
Non-current assets
Investments (Note 9)
Long-term portion of finance lease receivables (Note 17)
Risk management assets (Note 14 and 15)
Property, plant and equipment (Note 18)
Right-of-use assets (Note 19)
Intangible assets (Note 20)
Goodwill (Note 21)
Deferred income tax assets (Note 11)
Other assets (Note 22)
Total assets
Current liabilities
Bank overdraft (Note 14)
Accounts payable and accrued liabilities (Note 13)
Current portion of decommissioning and other provisions (Note 23)
Risk management liabilities (Note 14 and 15)
Current portion of contract liabilities
Income taxes payable
Dividends payable (Note 27 and 28)
Current portion of long-term debt and lease liabilities (Note 24)
Non-current liabilities
Credit facilities, long-term debt and lease liabilities (Note 24)
Exchangeable securities (Note 25)
Decommissioning and other provisions (Note 23)
Deferred income tax liabilities (Note 11)
Risk management liabilities (Note 14 and 15)
Contract liabilities
Defined benefit obligation and other long-term liabilities (Note 26)
Equity
Common shares (Note 27)
Preferred shares (Note 28)
Contributed surplus
Deficit
Accumulated other comprehensive loss (Note 29)
Equity attributable to shareholders
Non-controlling interests (Note 12)
Total equity
Total liabilities and equity
Commitments and contingencies (Note 36)
See accompanying notes.
2023
348
69
807
48
151
157
1,580
138
171
52
5,714
117
223
464
21
179
2022
1,134
70
1,589
55
709
157
3,714
129
129
161
5,556
126
252
464
50
160
8,659
10,741
3
797
35
314
3
9
49
532
1,742
2,934
744
654
386
274
10
251
3,285
942
41
(2,567)
(164)
1,537
127
1,664
8,659
16
1,346
70
1,129
8
73
68
178
2,888
3,475
739
659
352
333
12
294
2,863
942
41
(2,514)
(222)
1,110
879
1,989
10,741
On behalf of the Board:
John P. Dielwart
Director
Bryan D. Pinney
Chair of Audit, Finance and Risk Committee
TransAlta Corporation
2023 Integrated Report
F10
Consolidated Statements of Changes in Equity
(in millions of Canadian dollars)
Common
shares
Preferred
shares
Contributed
surplus
Deficit
2,901
942
46
(2,453)
Balance, Dec. 31, 2021
Net earnings
Other comprehensive income (loss):
Net losses on translating net assets of foreign
operations, net of hedges and of tax
Net losses on derivatives designated as cash
flow hedges, net of tax
Net actuarial gains on defined benefits plans, net
of tax
Intercompany and third-party FVTOCI
investments
Total comprehensive income (loss)
Common share dividends (Note 27)
Preferred share dividends (Note 28)
Shares purchased under NCIB program (Note
27)
Share-based payment plans and stock options
exercised (Note 30)
Distributions declared to non-controlling
interests (Note 12)
Balance, Dec. 31, 2022
Net earnings
Other comprehensive income (loss):
Net losses on translating net assets of foreign
operations, net of hedges and tax
Net gains on derivatives designated as cash flow
hedges, net of tax
Net actuarial gains on defined benefits plans, net
of tax
Intercompany FVTOCI investments
Total comprehensive income
Common share dividends (Note 27)
Preferred share dividends (Note 28)
Shares purchased under normal course issuer
bid ("NCIB") (Note 27)
Changes in non-controlling interests in TransAlta
Renewables (Note 4)
Provision for repurchase of shares under the
automatic share purchase plan (Note 27)
Share-based payment plans and stock options
exercised (Note 30)
Distributions declared to non-controlling
interests (Note 12)
—
—
—
—
—
—
—
—
(46)
8
—
2,863
—
—
—
—
—
—
—
—
(80)
510
(19)
11
—
—
—
—
—
—
—
—
—
—
—
—
942
—
—
—
—
—
—
—
—
—
—
—
—
—
Accumulated other
comprehensive
income (loss)(1)
Attributable to
shareholders
Attributable
to non-
controlling
interests
Total
146
—
1,582
1,011
2,593
50
111
161
(4)
(4)
—
(4)
(456)
(456)
—
(456)
37
55
37
55
—
37
(56)
(1)
(368)
(318)
55
(263)
—
—
—
—
—
—
3
99
(57)
(46)
(54)
3
—
—
—
—
—
(57)
(46)
(54)
3
(187)
(187)
1,110
695
879
1,989
101
796
3
99
—
3
—
99
(5)
(5)
—
(5)
25
122
—
—
—
25
817
(65)
(51)
(87)
(25) —
76
893
—
—
—
(65)
(51)
(87)
—
50
—
—
—
—
—
—
—
—
—
—
—
—
50
(57)
(46)
(8)
(5)
—
—
—
—
695
—
—
—
—
—
—
—
—
—
—
—
—
695
(65)
(51)
(7)
41
(2,514)
(222)
—
(625)
(64)
(179)
(630) (809)
—
—
—
—
—
—
—
—
—
(19)
—
(19)
11
—
—
11
(198) (198)
Balance, Dec. 31, 2023
3,285
942
41
(2,567)
(164)
1,537
127
1,664
(1) Refer to Note 29 for details on components of and changes in, accumulated other comprehensive income (loss).
See accompanying notes.
F11
TransAlta Corporation 2023 Integrated Report
Consolidated Statements of Cash Flows
(in millions of Canadian dollars)
Year ended Dec. 31
Operating activities
Net earnings (loss)
Depreciation and amortization (Note 37)
Gain on sale of assets and other
Accretion of provisions (Note 10 and 23)
Decommissioning and restoration costs settled (Note 23)
Deferred income tax expense (recovery) (Note 11)
Unrealized loss (gain) from risk management activities
Unrealized foreign exchange gain
Provisions and contract liabilities
Asset impairment charges (reversals) (Note 7)
Equity (income) loss, net of distributions from investments (Note 9)
Other non-cash items
Cash flow from operations before changes in working capital
Change in non-cash operating working capital balances (Note 33)
Cash flow from operating activities
Investing activities
Additions to property, plant and equipment (Note 18 and 37)
Additions to intangible assets (Note 20 and 37)
Restricted cash (Note 24)
Repayment (advances) from loan receivable (Note 22)
Acquisitions, net of cash acquired
Investments (Note 9)
Proceeds on sale of Pioneer Pipeline
Proceeds on sale of property, plant and equipment
Realized gain (loss) on financial instruments
Decrease in finance lease receivable
Other
Change in non-cash investing working capital balances
Cash flow used in investing activities
Financing activities
Net increase (decrease) in borrowings under credit facilities (Note 24 and 33)
Repayment of long-term debt (Note 24 and 33)
Issuance of long-term debt (Note 24 and 33)
Dividends paid on common shares (Note 27)
Dividends paid on preferred shares (Note 28)
Repurchase of common shares under NCIB (Note 27)
Proceeds on issuance of common shares
Realized gain (loss) on financial instruments
Acquisition of TransAlta Renewables (Note 4)
Distributions paid to subsidiaries' non-controlling interests (Note 12)
Decrease in lease liabilities (Note 24 and 33)
Financing fees and other
Change in non-cash financing working capital balances
Cash flow from (used in) financing activities
Cash flow from (used in) operating, investing and financing activities
Effect of translation on foreign currency cash
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Cash taxes paid
Cash interest paid
Cash interest received
See accompanying notes.
2023
2022
2021
796
621
(3)
48
(37)
34
(36)
(9)
(1)
(48)
2
(27)
1,340
124
1,464
(875)
(13)
1
11
—
(13)
—
29
18
55
(25)
(2)
(814)
(46)
(164)
39
(58)
(51)
(87)
5
(30)
(811)
(223)
(10)
1
3
(1,432)
(782)
(4)
(786)
1,134
348
94
277
54
161
599
(32)
49
(35)
127
385
(82)
19
9
(4)
(3)
1,193
(316)
877
(425)
719
(54)
32
(18)
(11)
(34)
(24)
(41)
648
(5)
40
827
174
1,001
(918)
(480)
(31)
—
18
(10)
(10)
—
66
27
46
45
26
(9)
(1)
(3)
(120)
—
128
39
(6)
41
(16)
(45)
(741)
(472)
449
(621)
532
(54)
(43)
(52)
3
42
—
(187)
(9)
(13)
(2)
45
181
6
187
947
1,134
67
229
20
(114)
(92)
173
(48)
(39)
(4)
8
3
—
(156)
(8)
(4)
(1)
(282)
247
(3)
244
703
947
57
220
7
TransAlta Corporation
2023 Integrated Report
F12
Notes to the Consolidated
Financial Statements
(Tabular amounts in millions of Canadian dollars, except as otherwise noted)
1. Corporate Information
A. Description of the Business
TransAlta Corporation (“TransAlta” or the “Company”) was
incorporated under the Canada Business Corporations Act
in March 1985. The Company became a public company in
December 1992. The Company's head office is located in
Calgary, Alberta.
Operating Segments
Generation Segments
The four generation segments of the Company are as
follows: Hydro, Wind and Solar, Gas, and Energy Transition.
The Company directly or indirectly owns and operates
hydro, wind and solar, natural gas-fired facilities, a coal-
fired facility and natural gas pipeline operations in Canada,
the United States (“US”) and Australia. Transmission in
Canada is included within the Hydro segment while
transmission in Australia is included in the Gas segment.
The Wind and Solar segment includes the financial results,
in SP
investment
on a proportionate basis, of our
Skookumchuck
("Skookumchuck").
LLC
Segment revenues are derived from the availability and
production of electricity and steam as well as
ancillary services.
Investment,
Energy Marketing Segment
The Energy Marketing segment derives revenue and
earnings from the trading of electricity, natural gas and
environmental products across a variety of North American
markets, excluding Alberta.
The Energy Marketing segment also performs services on
behalf of certain assets outside of Alberta for the power
marketing of available generating capacity as well as the
procurement of the fuel and transmission needs for the
fleet. Contracts of various durations for the forward sales
of electricity and for the purchase of natural gas and
transmission capacity are utilized. The results of these
activities are included in the gross margin of the related
generation segment. The Energy Marketing segment
allocates charges to recognize the performance of these
activities to the applicable generation segments.
Corporate Segment
The Corporate segment includes the Company’s central
finance, legal, administrative, corporate development, and
investor relations functions. Activities and charges directly
or
to other segments are
allocated thereto.
reasonably attributable
B. Basis of Preparation
These Consolidated Financial Statements have been
prepared by management in compliance with International
Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
The Consolidated Financial Statements have been
prepared on a historical cost basis except for financial
instruments, which are measured at fair value, as explained
in the following accounting policies.
These Consolidated Financial Statements were authorized
for issue by TransAlta's Board of Directors (the "Board") on
Feb. 22, 2024.
C. Basis of Consolidation
include
The Consolidated Financial Statements
the
accounts of the Company and the subsidiaries that it
controls. Control exists when the Company is exposed, or
has rights, to variable returns from its involvement with the
subsidiary and has the ability to affect the returns through
its power over the subsidiary. The financial statements of
the subsidiaries are prepared for the same reporting period
and apply consistent accounting policies as
the
parent company.
F13
TransAlta Corporation 2023 Integrated Report
2. Material Accounting Policies
to
The Company has reviewed
its material accounting
policies. The definition of material that management has
used
that
judgmentally determine disclosure
information is material if omitting it or misstating it could
influence decisions users make on
the basis of
financial information.
is
A. Revenue Recognition
I. Revenue from Contracts with Customers
indication of significant changes
The majority of the Company’s revenues from contracts
with customers are derived from the sale of generation
capacity, electricity,
thermal energy, environmental
attributes and byproducts of power generation. The
Company evaluates whether the contracts it enters into
meet the definition of a contract with a customer at the
inception of the contract and on an ongoing basis if there
is an
in facts and
circumstances. Contract modifications are accounted for
as separate contracts when the consideration for the
additional promised goods reflects a stand-alone selling
price. Otherwise, contract modifications are accounted for
as part of the existing contract. If the additional goods are
not considered distinct the transaction price can be
affected and adjustments
recognized
revenue can occur. If the additional goods are distinct, the
existing and modified contracts are treated together as a
new contract, with impacts reflected prospectively from
the modification date, which can include the blending of
contract prices. Revenue is measured based on the
transaction price specified in a contract with a customer.
Revenue is recognized when control of the goods or
services are transferred to the customer. For certain
contracts, revenue may be recognized at the invoiced
amount, as permitted using the invoice practical expedient,
if such amount corresponds directly with the Company’s
performance to date. The Company excludes amounts
collected on behalf of third parties from revenue.
to previously
Performance Obligations
for
Each promised good or service
separately as a performance obligation if it is distinct.
The Company’s contracts may contain more than one
performance obligation.
is accounted
Transaction Price
The Company allocates the transaction price
in the
contract to each performance obligation. Transaction price
allocated to performance obligations may include variable
consideration. Variable consideration is included in the
transaction price for each performance obligation when it
is highly probable that a significant reversal of the
cumulative variable revenue will not occur. Variable
consideration that has previously been constrained is
assessed at each reporting period to determine whether
the constraint is lifted. The consideration contained in
some of the Company's contracts with customers is
primarily variable and may include both variability in
quantity and pricing, such as: revenues can be dependent
upon future production volumes that are driven by
customer or market demand or by the operational ability of
the plant; revenues can be dependent upon the variable
cost of producing the energy; revenues can be dependent
upon market prices; and revenues can be subject to
various indices and escalators.
When multiple performance obligations are present in a
is allocated to each
contract, the transaction price
performance obligation in an amount that depicts the
consideration the Company expects to be entitled to in
exchange for transferring the good or service. The
Company estimates the amount of the transaction price to
allocate to individual performance obligations based on
their relative stand-alone selling prices, which is primarily
estimated based on the amounts that would be charged to
customers under similar market conditions.
TransAlta Corporation
2023 Integrated Report
F14
Recognition
The nature, timing of recognition of satisfied performance obligations and payment terms for the Company’s goods and
services are described below:
Good or service
Description
Capacity
Contract power
Thermal energy
Capacity refers to the availability of an asset to deliver goods or services. Customers typically
pay for capacity for each defined time period (e.g., monthly) in an amount representative of the
availability of the asset for the defined time period. Obligations to deliver capacity are satisfied
over time and revenue is recognized using a time-based measure. Contracts for capacity are
typically long term in nature. Payments are typically received from customers on a
monthly basis.
The sale of contract power refers to the delivery of units of electricity to a customer under the
terms of a contract. Customers pay a contractually specified price for the output at the end of
predefined contractual periods (e.g., monthly). Obligations to deliver electricity are satisfied
over time and revenue is recognized using a units-based output measure (i.e., megawatt
hours). Contracts for power are typically long term in nature and payments are typically
received on a monthly basis.
Thermal energy refers to the delivery of units of steam to a customer under the terms of a
contract. Customers pay a contractually specified price for the output at the end of predefined
contractual periods (e.g., monthly). Obligations to deliver steam are satisfied over time and
revenue is recognized using a units-based output measure (i.e., gigajoules). Contracts for
thermal energy are typically long term in nature. Payments are typically received from
customers on a monthly basis.
Environmental attributes Environmental attributes refers to the delivery of renewable energy certificates, green
attributes and other similar items. Customers may contract for environmental attributes in
conjunction with the purchase of power, in which case the customer pays for the attributes in
the month subsequent to the delivery of the power. Alternatively, customers pay upon delivery
of the environmental attributes. Obligations to deliver environmental attributes are satisfied at
a point in time, generally upon delivery of the item.
Generation byproducts
Generation byproducts refers to the sale of byproducts from the use of coal in the Company’s
current US and previous Canadian coal operations. Obligations to deliver byproducts are
satisfied at a point in time, generally upon delivery of the item. Payments are received upon
satisfaction of delivery of the byproducts.
A contract liability is recorded when the Company receives
consideration before the performance obligations have
been satisfied. A contract asset is recorded when the
Company has rights to consideration for the completion of
a performance obligation before
invoiced the
customer. The Company recognizes unconditional rights to
consideration separately as a receivable. Contract assets
and receivables are evaluated at each reporting period to
determine whether there is any objective evidence that
they are impaired.
it has
II. Revenue from Other Sources
Merchant Revenue
Revenues from non-contracted capacity (i.e., merchant)
include energy payments, at market price, for each MWh
produced and are recognized upon delivery.
Lease Revenue
In certain situations, a long-term electricity or thermal sales
contract may contain, or be considered, a lease. Revenues
associated with non-lease elements are recognized as
goods or services revenues as outlined above. Where the
terms and conditions of the contract result in the customer
assuming the principal risks and rewards of ownership of
the underlying asset, the contractual arrangement
is
considered a finance lease, which results in the recognition
of finance lease income. Where the Company retains the
principal risks and rewards, the contractual arrangement is
an operating lease. Rental income, including contingent
rents where applicable, is recognized over the term of
the contract.
F15
TransAlta Corporation 2023 Integrated Report
Revenue from Derivatives
Commodity risk management activities involve the use of
derivatives such as physical and financial swaps, forward
sales contracts, futures contracts and options, which are
used to earn revenues and to gain market information. The
Company also enters into contracts for differences and
Virtual Power Purchase Agreements ("VPPA"). Contracts
for differences are financial contracts whereby the
Company receives a fixed price per MWh and pays the
prevailing real-time energy market price per MWh. A VPPA
is whereby the Company receives the difference between
the fixed contract price per MWh and the settled market
price. These arrangements meet the definition of a
derivative and judgment is applied to determine if the
contract meets the "own use" exemption or if derivative
treatment is required.
initial
These derivatives are accounted for using fair value
accounting. The
recognition and subsequent
changes in fair value affect reported net earnings in the
period the change occurs and are presented on a net basis
in revenue. The fair values of instruments that remain open
at the end of the reporting period represent unrealized
gains or losses and are presented on the Consolidated
Statements of Financial Position as risk management
assets or liabilities. Some of the derivatives used by the
Company in trading activities are not traded on an active
exchange or have terms that extend beyond the time
period for which exchange-based quotes are available. The
fair values of these derivatives are determined using
internal valuation techniques or models.
B. Financial Instruments and Hedges
I. Financial Instruments
Classification and Measurement
IFRS 9 introduced the requirement to classify and measure
financial assets based on their contractual cash flow
characteristics and the Company’s business model for the
financial asset. All financial assets and financial liabilities,
including derivatives, are recognized at fair value on the
Consolidated Statements of Financial Position when the
Company becomes party to the contractual provisions of a
financial instrument or non-financial derivative contract.
Financial assets must be classified and measured at either
amortized cost, at fair value through profit or
loss
(“FVTPL”), or at fair value through other comprehensive
income (loss) (“FVTOCI”).
Financial assets with contractual cash flows arising on
specified dates, consisting solely of principal and interest
and that are held within a business model whose objective
is to collect the contractual cash flows, are subsequently
measured at amortized cost. Financial assets measured at
FVTOCI are those that have contractual cash flows, arising
on specific dates, consisting solely of principal and interest
and that are held within a business model whose objective
is to collect the contractual cash flows and to sell the
financial asset and investments in equity instruments. All
other
financial assets are subsequently measured
at FVTPL.
Financial liabilities are classified as FVTPL when the
financial liability is held for trading. All other financial
liabilities are subsequently measured at amortized cost.
tax
credits,
investment
accelerated
Funds received under tax equity investment arrangements
are classified as long-term debt. These arrangements are
used in the US where project investors acquire an equity
investment in the project entity and in return for their
investment, are allocated substantially all of the earnings,
cash flows and tax benefits (such as production tax
credits,
tax
depreciation, as applicable) until they have achieved the
agreed upon target rate of return. Once achieved, the
arrangements flip, with the Company then receiving the
majority of earnings, cash flows and tax benefits. At that
time, the tax equity investor's investment is subsequently
considered residual equity ownership with distributions
In applying the
classified as non-controlling
effective interest method to tax equity financings, the
Company has made an accounting policy choice to
recognize the
in net
interest expense.
impacts of the tax attributes
interest.
The Company enters into a variety of derivative financial
instruments to manage its exposure to commodity price
risk, interest rate risk and foreign currency exchange risk,
including fixed price financial swaps, long-term physical
power sale contracts, foreign exchange forward contracts
and designating foreign currency debt as a hedge of net
investments in foreign operations.
Derivatives are initially recognized at fair value at the date
the derivative contracts are entered
into and are
subsequently remeasured to their fair value at the end of
each reporting period. The resulting gain or loss is
recognized
immediately, unless the
is designated and effective as a hedging
derivative
instrument, in which case the timing of the recognition in
net earnings
the
hedging relationship.
is dependent on
in net earnings
the nature of
Derivatives embedded in non-derivative host contracts
that are not financial assets within the scope of IFRS 9
(e.g., financial liabilities) are treated as separate derivatives
when they meet the definition of a derivative, their risks
and characteristics are not closely related to those of the
host contracts and the host contracts are not measured at
FVTPL. Derivatives embedded in hybrid contracts that
contain financial asset hosts within the scope of IFRS 9 are
not separated and the entire contract is measured at either
FVTPL or amortized cost, as appropriate.
Financial assets are derecognized when the contractual
rights to receive cash flows expire. Financial liabilities are
derecognized when the obligation is discharged, cancelled
or expired.
TransAlta Corporation
2023 Integrated Report
F16
Financial assets are also derecognized when the Company
has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received
cash flows to a third party under a "pass-through"
arrangement and either transferred substantially all the
risks and rewards of the asset, or transferred control of the
asset. TransAlta will continue to recognize the asset and
any associated liability if TransAlta retains substantially all
of the risks and rewards of the asset, or retains control of
the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the
maximum amount of consideration that TransAlta could be
required to repay.
Financial assets and financial liabilities are offset and the
net amount is reported in the Consolidated Statements of
Financial Position if there is a currently enforceable legal
right to offset the recognized amounts and there is an
intention to settle on a net basis or to realize the assets
and settle the liabilities simultaneously.
II. Hedges
Where hedge accounting can be applied and the Company
chooses to seek hedge accounting treatment, a hedge
relationship is designated as a fair value hedge, a cash flow
hedge or a hedge of foreign currency exposures of a net
investment in a foreign operation.
A relationship qualifies for hedge accounting
if, at
inception, it is formally designated and documented as a
hedge and the hedging instrument and the hedged item
have values that generally move in opposite direction
because of the hedged risk. The documentation includes
identification of the hedging instrument and hedged item
or transaction, the nature of the risk being hedged, the
Company’s risk management objectives and strategy for
undertaking the hedge and how hedge effectiveness will
be assessed. The process of hedge accounting includes
linking derivatives to specific recognized assets and
liabilities or to specific firm commitments or highly probable
anticipated transactions.
instruments,
such as debt
Transaction costs are expensed as incurred for financial
instruments classified or designated as FVTPL. For other
financial
instruments,
transaction costs are recognized as part of the carrying
amount of the financial instrument. The Company uses the
effective
for any
interest method of amortization
transaction costs or fees, premiums or discounts earned or
incurred
at
for
amortized cost.
instruments measured
financial
Impairment of Financial Assets
TransAlta recognizes an allowance for expected credit
losses for financial assets measured at amortized cost as
well as certain other instruments. The loss allowance for a
financial asset is measured at an amount equal to the
lifetime expected credit loss if its credit risk has increased
significantly since initial recognition or if the financial asset
is a purchased or originated credit-impaired financial asset.
If the credit risk on a financial asset has not increased
significantly since initial recognition, its loss allowance is
measured at an amount equal to the 12-month expected
credit loss.
For trade receivables, lease receivables and contract
assets recognized under IFRS 15, TransAlta applies a
simplified approach for measuring the loss allowance.
Therefore, the Company does not track changes in credit
risk but instead recognizes a loss allowance at an amount
equal to the lifetime expected credit losses at each
reporting date.
The assessment of the expected credit loss is based on
historical data
forward-looking
information. Forward-looking information utilized includes
third-party default
time, dependent on
credit ratings.
adjusted by
rates over
and
F17
TransAlta Corporation 2023 Integrated Report
The Company formally assesses, both at the hedge’s
inception and on an ongoing basis, whether the derivatives
used are highly effective in offsetting changes in fair
values or cash flows of hedged items. If hedge criteria are
not met or the Company does not apply hedge accounting,
the
recognized at
the derivative
Consolidated Statements of Financial Position, with
subsequent changes in fair value recorded in net earnings
in the period of change.
fair value on
is
Fair Value Hedges
In a fair value hedging relationship, the carrying amount of
the hedged item is adjusted for changes in fair value
attributable to the hedged risk, with the changes being
recognized in net earnings. Changes in the fair value of the
hedged item, to the extent that the hedging relationship is
effective, are offset by changes in the fair value of the
hedging derivative, which is also recorded in net earnings.
For fair value hedges relating to items carried at amortized
cost, any adjustment to carrying value is amortized through
profit or loss over the remaining term of the hedge using
the effective
interest rate ("EIR") method. The EIR
amortization may begin as soon as an adjustment exists
and no later than when the hedged item ceases to be
adjusted for changes in its fair value attributable to the risk
being hedged.
If the hedged item is derecognized, the unamortized fair
value is recognized immediately in profit or loss.
Cash Flow Hedges
In a cash flow hedging relationship, the effective portion of
the change in the fair value of the hedging derivative is
recognized in other comprehensive income (loss) ("OCI")
while any ineffective portion is recognized in net earnings.
The cash flow hedge reserve is adjusted to the lower of
the cumulative gain or loss on the hedging instrument and
the cumulative change in fair value of the hedged item.
is discontinued, the
If cash flow hedge accounting
amounts previously recognized
in accumulated other
comprehensive income (loss) ("AOCI") must remain in AOCI
if the hedged future cash flows are still expected to occur.
Otherwise, the amount will be immediately reclassified to
net earnings as a reclassification adjustment. After
discontinuation, once the hedged cash flow occurs, any
amount remaining
in AOCI must be accounted for
depending on the nature of the underlying transaction.
Hedges of Foreign Currency Exposures of a Net
Investment in a Foreign Operation
In hedging of a foreign currency exposure of a net
investment in a foreign operation, the effective portion of
foreign exchange gains and
losses on the hedging
instrument is recognized in OCI and the ineffective portion
is recognized in net earnings. The related fair values are
recorded in risk management assets or liabilities, as
appropriate. The amounts previously recognized in AOCI
are recognized in net earnings when there is a reduction in
the hedged net investment as a result of a disposal, partial
disposal or loss of control.
C. Cash and Cash Equivalents
Cash and cash equivalents comprises cash and highly
liquid investments with original maturities of three months
or less.
D. Inventory
I. Fuel
The Company’s inventory balance is composed of coal and
natural gas used as fuel, which is measured at the lower of
weighted average cost and net realizable value. The cost
of natural gas and purchased coal inventory includes all
applicable expenditures and charges incurred in bringing
the inventory to its existing condition and location.
II. Energy Marketing
Commodity inventories held in the Energy Marketing
segment for trading purposes are measured at fair value
less costs to sell. Changes in fair value less costs to sell
are recognized in net earnings in the period of change.
III. Parts, Materials and Supplies
Parts, materials and supplies are recorded at the lower of
cost and measured at moving average costs and net
realizable value.
IV. Emission Credits and Allowances
Emission credits and allowances are recorded as inventory
at cost. Those purchased for use by the Company are
recorded at cost and are carried at the lower of weighted
average cost and net realizable value. For emission credits
that are not ordinarily interchangeable, the Company
identification
records the credits using the specific
method. Credits granted to, or internally generated by,
TransAlta are recorded at nil. Emission liabilities are
recorded at the estimated compliance cost required by the
Company to settle its obligation in excess of government-
established caps and targets. Compliance costs that are
recoverable under the terms of the contracts with third
parties are recognized as Revenue
from Contracts
with Customers.
Emission credits and allowances that are held for trading
and that meet the definition of a derivative are accounted
for using the fair value method of accounting. Emission
credits and allowances that do not satisfy the criteria of a
derivative are accounted for using the accrual method.
E. Property, Plant and Equipment
investment
in property, plant and
The Company’s
equipment (“PP&E”) is initially measured at the original cost
of each component at the time of construction, purchase
or acquisition. A component is a tangible portion of an
asset that can be separately identified and depreciated
over its own expected useful life and is expected to
provide a benefit for a period in excess of one year.
Original cost includes items such as materials, labour,
borrowing costs and other directly attributable costs,
including
cost of
decommissioning and restoration. Costs are recognized as
PP&E if it is probable that future economic benefits will be
realized and the cost of the item can be measured reliably.
The cost of major spare parts is capitalized and classified
as PP&E, as these items can only be used in connection
with an item of PP&E.
estimate of
initial
the
the
Planned maintenance is performed at regular intervals.
Planned major maintenance includes inspection, repair and
maintenance of existing components and the replacement
of existing components. Costs incurred for planned major
maintenance activities are capitalized
in the period
maintenance activities occur and are amortized on a
straight-line basis over the term until the next major
maintenance event. Expenditures
the
replacement of components during major maintenance are
capitalized and amortized over the estimated useful life of
such components.
incurred
for
The cost of routine repairs and maintenance and the
replacement of minor parts is charged to net earnings as
and
incurred. Subsequent
measurement at cost, all classes of PP&E continue to be
measured using the cost model and are reported at cost
less accumulated depreciation and impairment losses,
if any.
recognition
initial
to
TransAlta Corporation
2023 Integrated Report
F18
An item of PP&E or a component is derecognized upon
disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising
on derecognition is included in net earnings when the
asset is derecognized. The estimate of the useful life of
each component of PP&E is based on current facts and
past experience and takes into consideration existing long-
term sales agreements and contracts, current and
forecasted demand and the potential for technological
obsolescence. The useful life is used to estimate the rate
at which the component of PP&E is depreciated. PP&E
assets are subject to depreciation when the asset is
considered to be available for use, which is typically upon
commencement of commercial operations.
Insurance
spares that are designated as critical for uninterrupted
operation in a particular facility are depreciated over the
life of that facility, even if the item is not in service. Capital
spares begin to be depreciated when the item is put into
service. Each significant component of an item of PP&E is
depreciated to its residual value over its estimated useful
life, generally using straight-line or unit-of-production
lives, residual values and
methods. Estimated useful
depreciation methods are reviewed annually and are
subject to revision based on new or additional information.
The effect of a change in useful life, residual value or
depreciation method is accounted for prospectively.
Estimated remaining useful lives of the components of
depreciable assets, categorized by asset class, are
as follows:
Hydro generation
Wind and Solar generation
Gas generation
Energy Transition
Capital spares and other
1-49 years
1-30 years
1-34 years
1-9 years
1-49 years
TransAlta capitalizes borrowing costs on capital invested in
projects under construction. Upon commencement of
commercial operations, capitalized borrowing costs, as a
portion of the total cost of the asset, are depreciated over
the estimated useful life of the related asset.
F. Intangible Assets
Intangible assets acquired in a business combination are
recognized separately from goodwill at their fair value at
Intangible assets acquired
the date of acquisition.
separately are recognized at cost. Internally generated
intangible assets arising from development projects are
recognized when certain criteria related to the feasibility of
internal use or sale and probable future economic benefits
of the intangible asset, are demonstrated.
Intangible assets are initially recognized at cost, which is
composed of all directly attributable costs necessary to
create, produce and prepare the intangible asset to be
intended
in
capable of operating
by management.
the manner
F19
TransAlta Corporation 2023 Integrated Report
to
initial
recognition,
Subsequent
intangible assets
continue to be measured using the cost model and are
reported at cost
less accumulated amortization and
impairment losses, if any. Amortization is included in
the Consolidated
depreciation and amortization
Statements of Earnings (Loss).
in
Amortization commences when the intangible asset is
available for use and is computed on a straight-line basis
over the intangible asset’s estimated useful life. Estimated
useful lives of intangible assets may be determined, for
example, with reference to the term of the related contract
or licence agreement. The estimated useful lives and
amortization methods are reviewed annually with the
effect of any changes being accounted for prospectively.
Intangible assets consist of power sale contracts with fixed
prices higher than market prices at the date of acquisition,
software and intangibles under development. Estimated
remaining useful lives of intangible assets are as follows:
Software
Power sale contracts
1-7 years
1-18 years
G. Impairment of Tangible and Intangible
Assets Excluding Goodwill
At the end of each reporting period, the Company
assesses whether there is any indication that PP&E and
finite life intangible assets are impaired.
Factors that could indicate that an impairment exists
include: significant underperformance relative to historical
or projected operating results; significant changes in the
manner in which an asset is used, or in the Company’s
overall business strategy; or significant negative industry
or economic trends. In some cases, these events are clear.
However, in many cases, a clearly identifiable event
indicating possible impairment does not occur. Instead, a
series of individually insignificant events occur over a
period of time leading to an indication that an asset may be
impaired. This can be further complicated in situations
where the Company is not the operator of the facility.
Events can occur in these situations that may not be
known until a date subsequent to their occurrence.
The Company’s operations, the market and business
environment are routinely monitored and judgments and
assessments are made to determine whether an event has
occurred that indicates a possible impairment. If such an
event has occurred, an estimate
the
recoverable amount of the asset or cash-generating unit
(“CGU”) to which the asset belongs. Recoverable amount is
the higher of an asset’s fair value less costs of disposal and
its value in use. Fair value is the price that would be
received to sell an asset in an orderly transaction between
In
market participants at
determining fair value, recent market transactions are
the measurement date.
is made of
taken into account. If no such transactions can be
identified, an appropriate valuation model such as
discounted cash flow is used. Value in use is the present
value of the estimated future cash flows expected to be
derived from the asset from its continued use and ultimate
disposal by the Company. If the recoverable amount is less
than the carrying amount of the asset or CGU, an asset
impairment charge is recognized in net earnings and the
its
asset’s
recoverable amount.
reduced
carrying
amount
to
is
is any
If such
indication that an
At each reporting date, an assessment is made whether
impairment charge
there
previously recognized may no longer exist or may have
decreased.
indication exists, the recoverable
amount of the asset or CGU to which the asset belongs is
estimated and, if there has been an increase in the
recoverable amount, the impairment charge previously
recognized is reversed. Where an impairment charge is
subsequently reversed, the carrying amount of the asset is
increased to the lesser of the revised estimate of its
recoverable amount or the carrying amount that would
have been determined (net of depreciation) had no
impairment charge been recognized previously. A reversal
of an impairment charge is recognized in net earnings.
H. Goodwill
Goodwill arising in a business combination is recognized as
an asset at the date control is acquired. Goodwill is
measured as the cost of an acquisition plus the amount of
any non-controlling interest in the acquiree (if applicable)
less the fair value of the related identifiable assets
acquired and liabilities assumed.
Goodwill is not subject to amortization, but is tested for
impairment at least annually, or more frequently, if an
analysis of events and circumstances indicates that a
possible impairment may exist. These events could include
a significant change in financial position of the CGUs or
groups of CGUs to which the goodwill relates or significant
negative industry or economic trends. For impairment
purposes, goodwill is allocated to each of the Company’s
CGUs or groups of CGUs that are expected to benefit from
the synergies of the business combination in which the
goodwill arose. Accordingly, the Company performs its test
for impairment, where the recoverable amount of the CGUs
or groups of CGUs to which the goodwill relates is
compared to its carrying amount for each operating
segment. If the recoverable amount is less than the
carrying amount, an impairment charge is recognized in net
earnings immediately, by first reducing the carrying amount
of the goodwill and then by reducing the carrying amount
of the other assets in the unit. An impairment charge
recognized
in
subsequent periods.
reversed
goodwill
not
for
is
I. Income Taxes
The Company uses the liability method of accounting for
income taxes. Under the liability method, deferred income
tax assets and liabilities are recognized on the differences
between the carrying amounts of assets and liabilities and
their respective income tax basis (temporary differences).
A deferred income tax asset may also be recognized for
the benefit expected from unused tax credits and losses
available for carryforward, to the extent that it is probable
that future taxable earnings will be available against which
the tax credits and losses can be applied. Deferred income
tax assets and liabilities are measured based on income tax
rates and tax laws that are enacted or substantively
enacted by the end of the reporting period and that are
expected to apply in the years in which temporary
differences are expected to be realized or settled.
Deferred income tax is charged or credited to net earnings,
except when related to items charged or credited to either
OCI or directly to equity. The carrying amount of deferred
income tax assets is evaluated at the end of each reporting
period and is reduced to the extent that it is no longer
probable that sufficient taxable income will be available to
allow all or part of the asset to be realized. Unrecognized
deferred tax assets are reassessed at each reporting date
and are recognized to the extent that it has become
probable that future taxable income will allow the deferred
income tax asset to be recovered.
Deferred income tax liabilities are recognized for taxable
in
temporary differences arising on
subsidiaries, except where the Company is able to control
the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the
foreseeable future.
investments
Cash taxes paid disclosed on the Consolidated Statements
of Cash Flows includes income taxes and taxes paid
related to the Part VI.1 tax in Canada for the period.
J. Employee Future Benefits
The Company has defined benefit pension and other post-
employment benefit plans. The current service cost of
providing benefits under the defined benefit plans is
determined using the projected unit credit method
prorated based on service. The net interest cost is
determined by applying the discount rate to the net
defined benefit
liability. The discount rate used to
determine the present value of the defined benefit
obligation and the net interest cost, is determined by
reference to market yields at the end of the reporting
period on high-quality corporate bonds with terms and
currencies that match the estimated terms and currencies
of the benefit obligations. Remeasurements, which include
actuarial gains and losses and the return on plan assets
(excluding net interest), are recognized through OCI in the
period in which they occur. Actuarial gains and losses arise
TransAlta Corporation
2023 Integrated Report
F20
from experience adjustments and changes in actuarial
assumptions. Remeasurements are not reclassified to profit
or loss, from OCI, in subsequent periods.
Gains or losses arising from either a curtailment or
settlement of a defined benefit plan are recognized when
the curtailment or settlement occurs. When
the
restructuring of a benefit plan gives rise to a curtailment
is
and a settlement of obligations, the curtailment
accounted for prior to the settlement.
In determining whether statutory minimum
funding
requirements of the Company’s defined benefit pension
plans give rise to recording an additional liability, letters of
credit provided by the Company as security are considered
to alleviate the funding requirements. No additional liability
results in these circumstances.
Contributions payable under defined contribution pension
plans are recognized as a liability and an expense in the
period in which the services are rendered.
life, changes
adjusted discount rate, as a cost of the related PP&E (see
Note 2(E)) to the extent the related PP&E asset is still in
use. Where the related PP&E asset has reached the end of
in the decommissioning and
its useful
restoration provision are recognized in net earnings. Where
the Company expects to receive reimbursement from a
third party for a portion of future decommissioning costs,
the reimbursement is recognized as a separate asset when
reimbursement will
that
it
be received.
is virtually certain
the
Changes in other provisions resulting from revisions to
estimates of expenditures required to settle the obligation
or period-end revisions to the market-based, risk-adjusted
discount rate are recognized in net earnings.
The accretion of the net present value discount for both
the decommissioning and restoration provision and other
provisions are charged to net earnings each period and is
included in net interest expense.
K. Provisions
L. Leases
Provisions are recognized when the Company has a
present obligation (legal or constructive) as a result of a
past event, it is probable that the Company will be required
to settle the obligation and a reliable estimate can be made
of the amount of the obligation. A legal obligation can arise
through a contract, legislation or other operation of law. A
constructive obligation arises from an entity’s actions
whereby through an established pattern of past practice,
published policies or a sufficiently specific current
statement, the entity has indicated it will accept certain
responsibilities and has thus created a valid expectation
that it will discharge those responsibilities. The amount
recognized as a provision is the best estimate, remeasured
at each period-end, of the expenditures required to settle
the present obligation, considering
risks and
uncertainties associated with
the obligation. Where
expenditures are expected to be incurred in the future, the
obligation is measured at its present value using a current
market-based, risk-adjusted interest rate.
the
The Company records a decommissioning and restoration
provision for all generating facilities and mine sites for
which it is legally or constructively required to remove the
facilities at the end of their useful lives and restore the
plant or mine sites. For some hydro facilities, the Company
is required to remove the generating equipment, but is not
required to remove the structures.
Initial decommissioning provisions are recognized at their
present value when incurred. Each reporting date, the
Company determines the present value of the provision
using the current discount rates that reflect the time value
of money and associated risks. The Company recognizes
the initial decommissioning and restoration provisions, as
well as changes resulting from revisions to cost estimates
and period-end revisions to the market-based, risk-
F21
TransAlta Corporation 2023 Integrated Report
Under IFRS 16, a contract contains a lease when the
customer obtains the right to control the use of an
identified asset for a period of time
in exchange
for consideration.
I. Lessee
The Company enters into lease arrangements with respect
to land, building and office space, vehicles and site
machinery and equipment. For all contracts that meet the
definition of a lease under IFRS 16 in which the Company is
the lessee and which are not exempt as short-term or low-
value leases, the Company:
• Recognizes right-of-use assets and lease liabilities in the
Consolidated Statements of Financial Position;
• Recognizes depreciation of the right-of-use assets and
interest expense on lease liabilities in the Consolidated
Statements of Earnings (Loss); and
• Recognizes the principal repayments on lease liabilities
as financing activities and interest payments on lease
liabilities as operating activities in the Consolidated
Statements of Cash Flows.
For short-term and
recognizes the lease payments as operating expenses.
leases, the Company
low-value
Variable lease payments that do not depend on an index or
a rate are not included in the measurement of the lease
liability and the right-of-use asset and are recognized as
an expense in the period in which the event or condition
that triggers the payments occurs.
Right-of-use assets are initially measured at an amount
equal to the lease liability and adjusted for any payments
made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset, or to restore the
underlying asset or the site on which it is located, less any
lease incentives received.
of return on the net investment in each period and is
reflected in finance lease income on the Consolidated
Statements of Earnings (Loss).
the Company's
Lease liabilities are initially measured at the present value
of the lease payments that are not paid at commencement
and discounted using
incremental
borrowing rate or the rate implicit in the lease. The lease
liability is remeasured when there is a change in future
lease payments arising from a change in an index or rate,
or if there is a change in the Company’s estimate or
assessment of whether it will exercise an extension,
termination or purchase option. A corresponding
adjustment is made to the carrying amount of the right-of-
use asset, or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced
to zero.
The lease term includes periods covered by an option to
extend if the Company is reasonably certain to exercise
that option and periods covered by an option to terminate
if the Company is reasonably certain not to exercise
that option.
Right-of-use assets are depreciated over the shorter
period of either the lease term or the useful life of the
underlying asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset
reflects that the Company expects to exercise the
purchase option,
is
right-of-use asset
related
depreciated over the useful life of the underlying asset.
the
The Company has elected to apply the practical expedient
that permits a
to separate non-lease
components and instead account for any lease and
associated
a
single arrangement.
components
lessee not
non-lease
as
II. Lessor
Power Purchase Agreements ("PPAs") and other long-term
contracts may contain, or may be considered, leases
where the fulfilment of the arrangement is dependent on
the use of a specific asset (e.g., a generating unit) and the
arrangement conveys to the customer the right to control
the use of that asset.
Where the Company determines that the contractual
provisions of a contract contain, or are, a lease and result
in the customer assuming the principal risks and rewards of
ownership of the asset, the arrangement is a finance lease.
Assets subject to finance leases are not reflected as PP&E
and the net investment in the lease, represented by the
present value of the amounts due from the lessee, is
recorded in the Consolidated Statements of Financial
Position as a financial asset, classified as a finance lease
receivable. The payments considered to be part of the
leasing arrangement are apportioned between a reduction
in the lease receivable and finance lease income. The
is
finance
recognized using a method that results in a constant rate
income element of the payments
lease
Where the Company determines that the contractual
provisions of a contract contain, or are, a lease and result
in the Company retaining the principal risks and rewards of
ownership of the asset, the arrangement is an operating
lease. For operating leases, the asset is, or continues to be,
capitalized as PP&E and depreciated over its useful life.
M. Non-Controlling Interests
Non-controlling interests arise from business combinations
in which the Company acquires less than a 100 per cent
interest. Non-controlling interests are initially measured at
either fair value or at the non-controlling
interest’s
proportionate share of the acquiree’s identifiable net
assets. The Company determines on a transaction-by-
transaction basis for which the measurement method is
used. Non-controlling
interests also arise from other
contractual arrangements between the Company and other
parties, whereby the other party has acquired an equity
interest in a subsidiary and the Company retains control.
Subsequent to acquisition, the carrying amount of non-
controlling interests is increased or decreased by the non-
controlling interest’s share of subsequent changes in
equity and payments to the non-controlling interest. Total
comprehensive income (loss) is attributed to the non-
controlling interests even if this results in the non-
controlling interests having a negative balance.
When the proportion of the equity held by non-controlling
interests changes, the carrying amounts of the controlling
and non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiary. Any
difference between the amount by which the non-
controlling interests are adjusted and the fair value of the
consideration paid or received, is recognized directly in
equity and attributed to shareholders.
N. Joint Arrangements
A joint arrangement is a contractual arrangement that
establishes the terms by which two or more parties agree
to undertake and jointly control an economic activity. The
Company's joint arrangements are generally classified as
two types: joint operations and joint ventures.
A joint operation arises when the parties that have joint
control have rights to the assets and obligations for the
liabilities relating to the arrangement. Generally, each party
takes a share of the output from the asset and each bears
an agreed upon share of the costs incurred in respect of
the joint operation. The Company reports its interests in
joint operations in its Consolidated Financial Statements
the proportionate consolidation method by
using
recognizing its share of the assets, liabilities, revenues and
expenses in respect of its interest in the joint operation.
TransAlta Corporation
2023 Integrated Report
F22
is
In a joint venture, the venturers do not have rights to
individual assets or obligations of the venture. Rather, each
venturer has rights to the net assets of the arrangement.
The Company reports its interests in joint ventures using
the equity method. Under the equity method, the
investment is initially recognized at cost and the carrying
amount
increased or decreased to recognize the
Company’s share of the joint venture’s net earnings or loss
after the date of acquisition. The impact of transactions
between the Company and joint ventures is eliminated
based on the Company’s ownership interest. Distributions
received from joint ventures reduce the carrying amount of
the investment. Any excess of the cost of an acquisition
less the fair value of the recognized identifiable assets,
liabilities and contingent liabilities of an acquired joint
venture is recognized as goodwill and is included in the
carrying amount of the investment and is assessed for
impairment as part of the investment.
Investments in joint ventures are evaluated for impairment
at each reporting date by first assessing whether there is
objective evidence that the investment is impaired. If such
objective evidence is present, an impairment charge is
recognized if the investment’s recoverable amount is less
than its carrying amount. The investment’s recoverable
amount is determined as the higher of value in use and fair
value less costs of disposal.
O. Business Combinations
in which the acquisition constitutes a
Transactions
business are accounted for using the acquisition method.
Identifiable assets acquired and liabilities assumed are
measured at their acquisition date fair values. A business
consists of inputs and processes applied to those inputs
that have the ability to contribute to the creation of
outputs. Goodwill is measured as the excess of the fair
value of consideration transferred less the fair value of the
liabilities assumed.
identifiable assets acquired and
Acquisition-related
the business
combination, with the exception of costs to issue debt or
equity securities, are
in net earnings
as incurred.
recognized
to effect
costs
P. Significant Accounting Judgments and
Key Sources of Estimation Uncertainty
financial
to make
statements
requires
The preparation of
management
judgments, estimates and
assumptions that could affect the reported amounts of
assets, liabilities, revenues, expenses and disclosures of
contingent assets and liabilities during the period. These
estimates are subject to uncertainty. Actual results could
differ from those estimates due to factors such as
fluctuations in interest rates, foreign exchange rates,
inflation and commodity prices and changes in economic
conditions, legislation and regulations.
to make
In the process of applying the Company’s accounting
policies, management has
judgments and
estimates about matters that are highly uncertain at the
time the estimate is made and that could significantly
affect the amounts recognized
in the Consolidated
Financial Statements. Different estimates with respect to
key variables used in the calculations, or changes to
estimates, could potentially have a material impact on the
Company’s financial position or performance. The key
judgments and sources of estimation uncertainty are
described below:
I. Impairment of PP&E and Goodwill
Impairment exists when the carrying amount of an asset,
CGU or group of CGUs to which goodwill relates exceeds
its recoverable amount, which is the higher of its fair value
less costs of disposal and its value in use. An assessment
is made at each reporting date as to whether there is any
indication that an impairment charge may exist or that a
previously recognized impairment charge may no longer
exist or may have decreased. In determining fair value less
costs of disposal,
third-party
transactions for similar assets is used and if none is
available, other valuation techniques, such as discounted
cash flows, are used. Value in use is computed using the
present value of management’s best estimates of future
cash flows based on the current use and present condition
of the asset.
information
about
The optional fair value concentration test is applied on a
transaction-by-transaction basis to permit a simplified
assessment of whether an acquired set of activities and
assets are not a business. Where substantially all of the fair
value of the gross assets acquired is concentrated in a
single identifiable asset or group of similar identifiable
assets, the Company may elect to treat the acquisition as
an asset acquisition and not as a business combination.
In estimating either fair value less costs of disposal or
value
in use using discounted cash flow methods,
estimates and assumptions must be made about sales
prices, cost of sales, production, fuel consumed, capital
expenditures, retirement costs and other related cash
inflows and outflows over the life of the facilities. In
developing
these assumptions, management uses
estimates of contracted and future market prices based on
expected market supply and demand in the region in which
the plant operates, anticipated production levels, planned
and unplanned outages, changes to regulations and
transmission capacity or constraints for the remaining life
of the facilities.
F23
TransAlta Corporation 2023 Integrated Report
Discount rates are determined by employing a weighted
average cost of capital methodology that is based on
capital structure, cost of equity and cost of debt
assumptions based on comparable companies with similar
risk characteristics and market data as the asset, CGU or
group of CGUs subject to the test. These estimates and
assumptions are susceptible to change from period to
period and actual results can and often do, differ from the
estimates and can have either a positive or negative
impact on the estimate of the impairment charge and may
be material.
impairment testing. A CGU
The impairment outcome can also be impacted by the
determination of CGUs or groups of CGUs for asset and
goodwill
is the smallest
identifiable group of assets that generates cash inflows
that are largely independent of the cash inflows from other
assets or groups of assets and goodwill is allocated to
each CGU or group of CGUs that is expected to benefit
from the synergies of the acquisition from which the
goodwill arose. The allocation of goodwill is reassessed
upon changes in the composition of segments, CGUs or
In respect of determining CGUs,
groups of CGUs.
significant
is required to determine what
constitutes independent cash flows between power plants
that are connected to the same system. The Company
evaluates the market design, transmission constraints and
the contractual profile of each facility, as well as the
Company’s own commodity price risk management plans
and practices, in order to inform this determination.
judgment
With regard to the allocation or reallocation of goodwill,
significant judgment is required to evaluate synergies and
their impacts. Minimum thresholds also exist with respect
to segmentation and internal monitoring activities. The
Company evaluates synergies with regard to opportunities
from combined
functional
organization and future growth potential and considers its
own performance measurement processes in making this
determination. Information regarding significant judgments
and estimates in respect of impairment during 2021 to
2023 is disclosed in Notes 7, 18 and 21.
talent and
technology,
II. Leases
judgment
leases, management must use
In determining whether the Company’s contracts contain,
or are,
in
assessing whether the contract provides the customer with
the right to substantially all of the economic benefits from
the use of the asset during the lease term and whether the
customer obtains the right to direct the use of the asset
during the lease term. For those agreements considered to
contain, or be, leases, further judgment is required to
determine the lease term by assessing whether termination
or extension options are reasonably certain to be
exercised. Judgment is also applied in identifying in-
substance
(included) and variable
payments that are based on usage or performance factors
(excluded) and
lease and non-lease
components (services that the supplier performs) of
fixed payments
identifying
in
contracts and in allocating contract payments to lease and
non-lease components.
For leases where the Company is a lessor, judgment is
required to determine if substantially all of the significant
risks and rewards of ownership are transferred to the
customer or remain with the Company to appropriately
account for the agreement as either a finance or operating
lease. These judgments can be significant and impact how
the
the Company classifies amounts
arrangement as either PP&E or as a finance
lease
receivable on the Consolidated Statements of Financial
Position and therefore the amount of certain items of
upon
revenue
such classifications. In 2023, a finance lease receivable
was recognized as it was determined that the significant
risks and rewards of ownership of the facilities were
transferred to the customer. See Note 17.
dependent
expense
related
and
to
is
III. Income Taxes
Preparation of the Consolidated Financial Statements
involves determining an estimate of, or provision for,
income taxes in each of the jurisdictions in which the
Company operates. The process also involves making an
estimate of income taxes currently payable and income
taxes expected to be payable or recoverable in future
periods, referred to as deferred income taxes. Deferred
income taxes result from the effects of temporary
differences due to items that are treated differently for tax
and accounting purposes. The tax effects of these
differences are reflected in the Consolidated Statements
of Financial Position as deferred income tax assets and
liabilities. An assessment must also be made to determine
the likelihood that the Company’s future taxable income
will be sufficient to permit the recovery of deferred income
tax assets. To the extent that such recovery is not
probable, deferred income tax assets must be reduced.
Management uses the Company’s long-range forecasts as
a basis for evaluation of recovery of deferred income tax
its
assets. Management must exercise
assessment of continually changing tax interpretations,
regulations and legislation to ensure deferred income tax
assets and liabilities are complete and fairly presented.
the
Differing assessments and applications
Company’s estimates could materially impact the amounts
recognized for deferred income tax assets and liabilities.
Information regarding the impacts of the Company’s tax
policies is disclosed in Note 11.
judgment
than
in
IV. Financial Instruments and Derivatives
The Company’s financial instruments and derivatives are
accounted for at fair value, with the initial and subsequent
changes in fair value affecting earnings in the period the
change occurs. The fair values of financial instruments and
derivatives are classified within three levels, with Level III
fair values determined using inputs for the asset or liability
that are not readily observable. Transfers between levels
of the fair value hierarchy are deemed to have occurred at
TransAlta Corporation
2023 Integrated Report
F24
the
that caused
in more detail
in circumstances
the end of the reporting period in which the event or
change
transfer
levels are outlined and
occurred. These fair value
discussed
in Note 14. Some of the
Company’s fair values are included in Level III because
they are not traded on an active exchange or have terms
that extend beyond the time period for which exchange-
based quotes are available and require the use of internal
valuation techniques or models to determine fair value.
The determination of the fair value of these contracts and
derivative instruments can be complex and relies on
judgments and estimates concerning
future prices,
volatility and liquidity, among other factors. These fair
value estimates may not necessarily be indicative of the
amounts that could be realized or settled and changes in
these assumptions could affect the reported fair value of
financial instruments. Fair values can fluctuate significantly
and can be favourable or unfavourable depending on
current market conditions. Judgment is also used in
determining whether a highly probable
forecasted
transaction designated in a cash flow hedge is expected to
occur based on the Company’s estimates of pricing and
production to allow the future transaction to be fulfilled.
When the Company enters into contracts to buy or sell
non-financial items, such as certain commodities, and the
contracts can be settled net in cash, the Company must
use judgment to evaluate whether such contracts were
entered into and continue to be held for the purposes of
the receipt or delivery of the commodity in accordance
with the Company's expected purchase, sale or usage
requirements (i.e., normal purchase and sale). If this
assertion cannot be supported,
initially at contract
inception and on an ongoing basis, the contracts must be
accounted for as derivatives and measured at fair value,
with changes in fair value recognized in net earnings. In
supporting the normal purchase and sale assertion, the
Company considers the nature of the contracts, the
forecasted demand and supply requirements to which the
contracts relate and its past practice of net settling other
similar contracts, which may taint the normal purchase and
sale assertion. The Company also enters into PPAs and
contracts for differences and judgment is applied to
determine if the contract meets the "own use" exemption
or if derivative treatment is required.
V. Project Development Costs
Project development costs are recognized in operating
expenses until construction of a facility or acquisition of an
investment is likely to occur, there is reason to believe that
future costs are recoverable and that efforts will result in
future value to the Company, at which time the costs
incurred subsequently are included in PP&E or other
assets. The appropriateness of capitalization of these
costs is evaluated each reporting period and amounts
capitalized for projects no longer probable of occurring or
when there is uncertainty of timing of when the projects
will proceed are charged to net earnings. Management is
F25
TransAlta Corporation 2023 Integrated Report
in
result
required to use judgment to determine if there is reason to
believe that future costs are recoverable and that efforts
will
the Company when
determining the amount to be capitalized. Information
in
regarding project development costs
Note 22 and information on the write-off of project
development costs is disclosed in Note 7.
future value
is disclosed
to
VI. Provisions for Decommissioning and
Restoration Activities
TransAlta recognizes provisions for decommissioning and
restoration obligations as outlined in Note 2(K). Initial
decommissioning provisions and subsequent changes
thereto are determined using the Company’s best estimate
of the required cash expenditures, adjusted to reflect the
risks and uncertainties inherent in the timing and amount of
settlement. The estimated cash expenditures are present
valued using a current, risk-adjusted, market-based, pre-
tax discount rate. A change in estimated cash flows,
market interest rates or timing could have a material impact
on the carrying amount of the provision. Information
regarding significant judgments and estimates made during
2021 to 2023
in respect of decommissioning and
restoration provisions is disclosed in Notes 7, 18 and 23.
VII. Useful Life of PP&E
item of PP&E
life of the asset, existing
Each significant component of an
is
depreciated over its estimated useful life. Estimated useful
lives are determined based on current facts and past
experience and take into consideration the anticipated
long-term sales
physical
agreements and contracts, current and
forecasted
demand, the potential for technological obsolescence and
regulations. The useful lives of PP&E are reviewed at least
annually to ensure they continue to be appropriate.
Information on changes in useful lives of facilities is
disclosed in Note 18.
VIII. Employee Future Benefits
The Company provides pension and other post-
employment benefits, such as health and dental benefits,
to employees. The cost of providing these benefits is
including actual plan
dependent upon many factors,
experience and estimates and assumptions about
future experience.
The liability for pension and post-employment benefits and
in annual compensation
associated costs
expenses are impacted by estimates related to:
included
• Employee demographics, including age, compensation
levels, employment periods, the level of contributions
made to the plans and earnings on plan assets;
• The effects of changes to the provisions of the
plans; and
• Changes in key actuarial assumptions, including rates of
increases and
compensation and health-care cost
discount rates.
Due to the complexity of the valuation of pension and
post-employment benefits, a change in the estimate of any
one of these factors could have a material effect on the
carrying amount of the liability for pension and other post-
employment benefits or the related expense. These
assumptions are reviewed annually to ensure they continue
to be appropriate. Disclosures on employee future benefits
are disclosed in Note 31.
IX. Other Provisions
Where necessary, the Company recognizes provisions
arising
from ongoing business activities, such as
interpretation and application of contract terms, ongoing
litigation and force majeure claims. These provisions and
subsequent changes thereto, are determined using the
Company’s best estimate of the outcome of the underlying
event and can also be impacted by determinations made
by
in compliance with contractual
requirements. The actual amount of the provisions that
may be required could differ materially from the amount
recognized. More information is disclosed in Notes 8 and
23 with respect to other provisions.
third parties,
X. Revenue from Contracts with Customers
Where contracts contain multiple promises for goods or
services, management exercises judgment in determining
whether goods or services constitute distinct goods or
services or a series of distinct goods that are substantially
the same and that have the same pattern of transfer to the
customer. The determination of a performance obligation
affects whether the transaction price is recognized at a
point in time or over time. Management considers both the
mechanics of the contract and the economic and operating
environment of the contract in determining whether the
goods or services in a contract are distinct.
the historical production
In determining the transaction price and estimates of
variable consideration, management considers the past
history of customer usage in estimating the goods and
services to be provided to the customer. The Company
also considers
levels and
operating conditions for its variable generating assets. The
Company’s contracts generally outline a specific amount to
to a customer associated with each
be
performance obligation in the contract. Where contracts do
not specify amounts for individual performance obligations,
the Company estimates the amount of the transaction
price to allocate to individual performance obligations
based on their stand-alone selling price, which is primarily
estimated based on the amounts that would be charged to
customers under similar market conditions.
invoiced
The satisfaction of performance obligations requires
management to make judgments as to when control of the
underlying good or service transfers to the customer.
Determining when a performance obligation is satisfied
affects the timing of revenue recognition. Management
considers both customer acceptance of the good or
service and the impact of laws and regulations such as
certification
this
transfer occurs.
to determine when
requirements,
When contracts are modified, management must exercise
judgment to determine, depending upon the facts and
circumstances of the changes to the contract, whether the
modification is accounted for as a new contract or as part
of the existing contract. If it is required to be accounted for
as part of the existing contract the transaction price can be
affected and adjustments
recognized
revenue can occur, or the impacts can be reflected
prospectively from the modification date.
to previously
Management also applies judgment in determining whether
the invoice practical expedient permits recognition of
revenue at the invoiced amount if that invoiced amount
corresponds directly with the entity's performance to date.
XI. Classification of Joint Arrangements
Upon entering into a joint arrangement, the Company must
classify it as either a joint operation or joint venture, and
this classification affects the accounting for the joint
arrangement. In making this classification, the Company
exercises judgment in evaluating the terms and conditions
of the arrangement to determine whether the parties have
rights to the assets and obligations or rights to the net
assets. Factors such as the legal structure, contractual
arrangements and other facts and circumstances, such as
where the purpose of the arrangement is primarily for the
provision of the output to the parties and when the parties
are substantially the only source of cash flows for the
arrangement, must be evaluated to understand the rights
of the parties to the arrangement.
XII. Significant Influence
Upon entering into an investment, the Company must
classify it as either an investment in an associate or an
investment under IFRS 9. In making this classification, the
Company exercises judgment in evaluating whether the
Company has significant influence over the investee.
Significant influence is the power to participate in the
financial and operating policy decisions of the investee, but
is not control or joint control over those policies. If the
Company holds 20 per cent or more of the voting rights in
the investee, it is presumed that the entity has significant
influence, unless it can be clearly demonstrated that this is
not the case. Other factors such as representation on the
Board, participation in policy-making processes, material
transactions between
investee,
interchange of managerial personnel or providing essential
technical information are considered when assessing if the
Company has significant influence over an investee.
the Company and
TransAlta Corporation
2023 Integrated Report
F26
XIII. Change in Estimates
relating
During the year ended Dec. 31, 2023, there were changes
impairment charges
in estimates
18),
(Note
lives
(reversals)
decommissioning and other provisions (Note 23) and
defined benefit obligation (Note 26). During the year ended
to asset
useful
(Note
7),
Dec. 31, 2022, there were changes in estimates relating to
asset impairment charges (reversals) (Note 7), asset useful
lives and depreciation (Note 18), decommissioning and
other provisions (Note 23) and defined benefit obligation
(Note 26).
3. Accounting Changes
A. Current Accounting Changes
B. Future Accounting Changes
Amendments to IAS 12 Deferred Tax Related
to Assets and Liabilities Arising from a
Single Transaction
On May 7, 2021, the International Accounting Standards
Board (“IASB”) issued Deferred Tax Related to Assets and
Liabilities Arising from a Single Transaction, which amends
IAS 12 Income Taxes. The amendments clarify that the
initial recognition exemption under IAS 12 does not apply to
transactions such as
leases and decommissioning
obligations. These transactions give rise to equal and
offsetting temporary differences in which deferred tax
should be recognized.
The amendments are effective
for annual periods
beginning on or after Jan. 1, 2023, and were adopted by
the Company on that date. The Company's accounting
aligns with the amendment and no financial impact arose
upon adoption.
Amendments to IAS 12 International Tax
Reform — Pillar Two Model Rules
that
to ensure
The Organization
for Economic Co-operation and
Development (OECD) published Pillar Two model rules in
December 2021
large multinational
companies would be subject to a minimum 15 per cent tax
rate. In May 2023, the IASB issued amendments to IAS 12
Income Taxes to provide companies with
immediate
temporary relief from accounting for deferred taxes arising
from the OECD international tax reform. The amendments
clarify that IAS 12 applies to income taxes arising from tax
law enacted or substantively enacted to implement the
Pillar Two model rules published by the OECD. Pillar Two
legislation has not been enacted or substantively enacted
in any jurisdiction in which the Company operates and
therefore has not been reflected within our tax provisions
at Dec. 31, 2023.
F27
TransAlta Corporation 2023 Integrated Report
The Company closely monitors both new accounting
standards and amendments
to existing accounting
standards issued by the IASB. The following standards
have been issued but are not yet in effect.
Amendments to IAS 1 Non-current Liabilities
with Covenants and Classification of Liabilities
as Current or Non-current
In October 2022, the IASB issued Non-current Liabilities
with Covenants, which amends IAS 1 Presentation of
Financial Statements, to clarify how conditions with which
an entity must comply within 12 months after the reporting
period affect the classification of a liability. In January
2020, the IASB issued Classification of Liabilities as
Current or Non-current, which amends IAS 1 Presentation
of Financial Statements regarding the classification of
liabilities
clarifying
or
non‐current,
that contractual
rights and conditions existing at
the end of the reporting period are relevant in determining
whether the Company has a right to defer settlement of a
liability by at least 12 months.
current
as
Additionally, the IASB clarified that the classification of a
liability is unaffected by the likelihood that an entity will
exercise its deferral right. The amendments are effective
for annual periods beginning on or after Jan. 1, 2024, and
are to be applied retrospectively. On Jan. 1, 2024, the
Company will re-classify the Exchangeable Securities from
non-current liabilities to current liabilities as the conversion
option can be exercised at any time after Jan. 1, 2025,
although there is no obligation to deliver cash equivalent
resources and the holder cannot call for repayment. This
accounting is consistent with the amendment.
C. Comparative Figures
Certain comparative figures have been reclassified to
conform to the current period’s presentation. These
reclassifications did not
reported
net earnings.
impact previously
4. Business Acquisitions
TransAlta to Acquire Heartland Generation
On Nov. 2, 2023, the Company announced that it had
entered into a definitive share purchase agreement (the
"Agreement") with an affiliate of Energy Capital Partners,
the parent of Heartland Generation Ltd. and Alberta Power
(2000) Ltd. (collectively, "Heartland"), pursuant to which
TransAlta will acquire Heartland and its entire business
operations in Alberta and British Columbia. The purchase
price for the acquisition is $390 million, subject to working
capital and other adjustments, as well as the assumption of
$268 million of debt, for a total cost of $658 million. The
Company will finance the transaction using cash on hand
and draws on its credit facilities. Closing of the transaction
remains subject to regulatory approval.
Acquisition of TransAlta Renewables
On Oct. 5, 2023, the Company completed the acquisition
of
the outstanding common shares of TransAlta
Renewables not already owned, directly or indirectly, by
the Company. The consideration paid totalled $1.3 billion,
comprising $800 million of cash and 46 million common
shares of the Company valued at $514 million, based on an
$11.06 closing price of the Company’s shares on the
Toronto Stock Exchange on Oct. 4, 2023.
Transaction costs of $11 million incurred to effect the
acquisition, have been charged, net of income tax, against
Common Shares ($4 million) and Deficit ($7 million) on
closing of the acquisition.
the Company
retained control of TransAlta
Since
Renewables, the acquisition was accounted for as an
equity transaction. On closing of the transaction, Non-
controlling Interests was reduced by $630 million and
Accumulated Other Comprehensive Loss increased by $64
million to eliminate the balances previously attributed to
non-controlling interest holders of TransAlta Renewables.
The difference between consideration paid and these
amounts was recognized in Deficit.
The Company's syndicated credit facilities were amended
to effectively consolidate the TransAlta Renewables
syndicated credit facility and non-committed demand
facility
into the TransAlta credit facilities. The cash
drawings on the TransAlta Renewables' syndicated credit
facility were repaid and the outstanding letters of credit
were transferred to the TransAlta non-committed demand
facility. The TransAlta Renewables' credit facilities were
then terminated. This resulted in the TransAlta syndicated
credit facility increasing by $700 million to approximately
$2.0 billion. Refer to Note 24.
TransAlta Corporation
2023 Integrated Report
F28
5. Revenue
A. Disaggregation of Revenue
The majority of the Company's revenues are derived from the sale of power, capacity and environmental attributes,
leasing of power facilities and from asset optimization activities, which the Company disaggregates into the following
groups for the purpose of determining how economic factors affect the recognition of revenue.
Year ended Dec. 31, 2023
Revenues from contracts with customers
Power and other
Environmental attributes(1)
Revenue from contracts with customers
Revenue from leases(2)
Revenue from derivatives and other
trading activities(3)
Revenue from merchant sales
Other(4)
Total revenue
Revenues from contracts with customers
Timing of revenue recognition
At a point in time
Over time
Total revenue from contracts with customers
Hydro
Wind and
Solar
Gas
Energy
Transition
Energy
Marketing Corporate
Total
30
14
44
—
44
434
11
533
14
30
44
190
400
26
—
216
400
—
32
12
—
12
—
(2)
(172)
251
104
1,247
18
7
336
1,514
26
—
190
400
216
400
488
—
751
12
—
12
—
—
—
—
220
—
—
220
—
—
—
—
—
—
—
—
632
40
672
32
341
—
2,273
1
37
1
3,355
—
—
—
52
620
672
(1) The environmental attributes represent environmental attribute sales not bundled with power and other sales.
(2) Total lease income from long-term contracts that meet the criteria of operating leases.
(3) Represents realized and unrealized gains or losses from hedging and derivative positions. Volatility and pricing in commodity markets can vary
significantly from period to period and impact movements in derivative positions.
(4)
Other revenue includes production tax credits related to US wind facilities and other miscellaneous revenues.
F29
TransAlta Corporation 2023 Integrated Report
Year ended Dec. 31, 2022
Revenues from contracts with customers
Hydro
Wind and
Solar
Gas
Energy
Transition
Energy
Marketing Corporate
Total
Power and other
Environmental attributes(1)
33
220 462
1
50 —
Revenue from contracts with customers
34
270 462
Revenue from leases(2)
Revenue from derivatives and other
trading activities(3)
—
—
—
32
10
—
10
—
—
—
—
—
—
725
—
51
—
776
—
32
(121)
(821)
243
160
(2)
(541)
Revenue from merchant sales
564
119 1,529
Other(4)
Total revenue
8
21
7
606
289 1,209
Revenues from contracts with customers
Timing of revenue recognition
At a point in time
Over time
Total revenue from contracts with
customers
1
33
34
50 —
220 462
270 462
461
—
714
12
(2)
10
—
—
— 2,673
—
36
160
(2) 2,976
—
—
—
—
63
—
713
—
776
(1) The environmental attributes represent environmental attribute sales not bundled with power and other sales.
(2) Total lease income from long-term contracts that meet the criteria of operating leases.
(3) Represents realized and unrealized gains or losses from hedging and derivative positions. Volatility and pricing in commodity markets can vary
significantly from period to period and impact movements in derivative positions.
(4) Other revenue includes production tax credits related to US wind facilities and other miscellaneous revenues.
TransAlta Corporation
2023 Integrated Report
F30
Year ended Dec. 31, 2021
Hydro
Solar Gas
Wind and
Energy
Transition
Energy
Marketing Corporate
Total
Revenues from contracts with customers
Power and other
Environmental attributes(1)
Revenue from contracts with customers
Revenue from leases(2)
Revenue from derivatives and other
trading activities(3)
Revenue from merchant sales
Other(4)
Total revenue
Revenues from contracts with customers
Timing of revenue recognition
At a point in time
Over time
Total revenue from contracts with
customers
28
—
28
—
—
207 395
28 —
235 395
—
19
24
—
24
—
—
—
—
—
—
654
—
28
—
682
—
19
(22) (118)
138
211
4
213
345
10
35 808
546
57
5
1
—
—
—
1,734
—
73
383
305 1,109
709
211
4 2,721
—
28
28
28
2
207 393
235 395
23
1
24
—
—
—
—
53
—
629
—
682
(1) The environmental attributes represent environmental attribute sales not bundled with power and other sales.
(2) Total lease income from long-term contracts that meet the criteria of operating leases.
(3) Represents realized and unrealized gains or losses from hedging and derivative positions. Volatility and pricing in commodity markets can vary
significantly from period to period and impact movements in derivative positions.
(4) Other revenue includes production tax credits related to US wind facilities and other miscellaneous revenues.
related
that are
These amounts exclude revenues related to contracts that
qualify for the invoice practical expedient and future
to constrained variable
revenues
In many of the Company’s contracts,
consideration.
elements of
transaction price are considered
the
constrained, such as for variable revenues dependent upon
future production volumes that are driven by customer or
market demand or market prices that are subject to factors
outside the Company’s influence. As a result, the amounts
of future revenues disclosed above represent only a
portion of future revenues that are expected to be realized
by the Company from its contractual portfolio.
B. Performance Obligations
The performance obligations in the Company's contracts
with its customers include the provision of electricity and
steam capacity; the delivery of electricity, thermal energy
and environmental attributes; the provision of operation
and maintenance services and water management
services;
from
supply
and
coal generation.
of byproducts
the
The aggregate amount of transaction prices allocated to
remaining performance obligations (contract revenues that
have not yet been recognized) as at Dec. 31, 2023, is
approximately $2,700 million, with
approximately
$510 million expected to be recognized during the period
2024-2026; $505 million for the period of 2027-2029;
$725 million for the period of 2030-2034; and $960 million
for 2035 and thereafter.
F31
TransAlta Corporation 2023 Integrated Report
6. Expenses by Nature
Fuel, Purchased Power and Operations, Maintenance and Administration ("OM&A")
Fuel and purchased power and OM&A expenses classified by nature are as follows:
Year ended Dec. 31
Gas fuel costs
Coal fuel costs(1)
Royalty, land lease, other direct costs
Purchased power
Mine depreciation(2)
Salaries and benefits
Other operating expenses(3)
Total
2023
Fuel and
purchased
2022
Fuel and
purchased
2021
Fuel and
purchased
power OM&A
power OM&A
power OM&A
384
177
25
474
—
—
—
1,060
—
—
—
—
—
254
285
539
578
146
25
514
—
—
—
—
—
—
306
164
19
339
190
—
—
—
—
—
—
263
36
234
—
258
—
277
1,263
521
1,054
511
(1)
Included in coal fuel costs for 2021 was $17 million related to the impairment of coal inventory.
(2)
(3)
Included in mine depreciation for 2021 was $48 million related to mine depreciation that was initially recorded in the standard cost of coal inventory and
then subsequently written down during 2021.
Included in OM&A costs for 2023 was $14 million related to the write-down of parts and material inventory related to our natural-gas-fired facilities.
Included in OM&A costs for 2021 was $28 million related to the write-down of parts and material inventory related to the Highvale mine and coal
operations at our natural gas converted facilities.
TransAlta Corporation
2023 Integrated Report
F32
7. Asset Impairment Charges (Reversals)
As part of the Company’s monitoring controls, long-range
forecasts are prepared for each CGU. The long-range
forecast estimates are used to assess the significance of
potential indicators of impairment and provide criteria to
evaluate adverse changes in operations. The Company
its market
also considers the
capitalization and its book value, among other factors,
when reviewing for
impairment. When
impairment are present, the Company
indicators of
relationship between
indicators of
estimates a recoverable amount (the higher of value in use
or fair value less costs of disposal) for the affected CGUs
using discounted cash flow projections. The valuations are
subject to measurement uncertainty from assumptions and
inputs to the discount rates, power price forecasts, useful
lives of the assets (extending to the last planned asset
retirement
long-range forecasts, which
includes changes to production, fuel costs, operating costs
and capital expenditures.
in 2072) and
2023
2022
2021
(10)
(4)
—
—
21
43
—
—
(2)
5
12
5
540
27
32
17
10
648
The Company recognized the following asset impairment charges (reversals):
Year ended Dec. 31
Segments:
Hydro
Wind and Solar
Gas
Energy Transition
Corporate
Changes in decommissioning and restoration provisions on retired assets(1)
(34)
(53)
Intangible asset impairment charges - coal rights
Project development costs
Asset impairment charges (reversals)
—
—
(48)
—
—
9
(1) Changes relate to changes in discount rates and cash flow revisions on retired assets in 2023 and 2022 and cash flow revisions on retired assets in
2021. Refer to Note 23 for further details.
Hydro
Wind and Solar
During 2023, internal valuations indicated the fair value
less costs of disposal for two hydro facilities exceeded the
carrying value due to a contract extension and changes in
impacted
power price assumptions, which favourably
estimated future cash flows and resulted in a recoverability
test. As a result of the recoverability test an impairment
reversal of $10 million was recognized. The recoverable
amounts of $70 million in total were estimated based on
fair value less costs of disposal utilizing a discounted
cash flow approach and are categorized as a Level III fair
value measurement.
in discount rates, changes
During 2022, the Company recorded net impairment
charges of $21 million on four hydro facilities as a result of
changes in key assumptions, that included significant
increases
in pricing and
changes in estimated future cash flows. The recoverable
amounts of $89 million in total for these four assets were
estimated based on fair value less costs of disposal using a
discounted cash flow approach and are categorized as a
Level III fair value measurement.
During 2023, the Company recorded net impairment
reversals of $4 million.
During the year, internal valuations indicated the fair value
less costs of disposal of the assets exceeded the carrying
value due to changes in power price assumptions for three
wind facilities, which favourably impacted estimated future
impairment reversals of
in
cash flows and resulted
$17 million. The recoverable amounts of $540 million in
total were estimated based on fair value less costs of
disposal utilizing a discounted cash flow approach and are
categorized as a Level III fair value measurement.
Also in 2023, two wind facilities were impaired primarily
due to unfavourable power price assumptions and changes
in estimated future cash flows, resulting in a $13 million
recoverable amounts of
impairment charge. The
$130 million for these two assets were estimated based on
fair value less costs of disposal utilizing a discounted
cash flow approach and are categorized as a Level III fair
value measurement.
F33
TransAlta Corporation 2023 Integrated Report
During 2022, the Company recorded net impairment
charges of $43 million on five wind facilities and one solar
facility as a result of changes in key assumptions, that
included significant increases in discount rates, changes in
pricing and changes in estimated future cash flows. The
recoverable amounts of $754 million for these six assets
were estimated based on fair value less costs of disposal
utilizing a discounted cash flow approach and categorized
as a Level III fair value measurement.
During 2021, the Company recorded impairment charges of
$10 million for a wind asset as a result of an increase in
estimated decommissioning costs after the review of an
engineering study commissioned for the wind sites. The
recoverable amount of $65 million was estimated based on
fair value less costs of disposal utilizing a discounted cash
flow approach, using a discount rate of 5.0 per cent, and
was categorized as a Level III fair value measurement.
the Company
recognized
Additionally, during 2021,
impairment charges of $2 million related to the Kent Hills
Wind LP tower failure. The Company's subsidiary, Kent Hills
Wind LP, experienced a single tower failure at its 167 MW
Kent Hills wind facility in Kent Hills, New Brunswick. The
failure involved a collapsed tower located within the Kent
Hills 2 site.
The calculation of fair value less costs of disposal for all of
the
the
following assumptions:
is most
sensitive
facilities
above
to
Location of assets
Canada
US
Canada
Current year contract
and merchant
discount rates
Prior year contract
and merchant
discount rates
6.4 and 7.0 per cent
6.4 and 7.1 per cent
6.9 and 7.5 per cent
6.5 and 7.7 per cent
6.1 and 6.4 per cent
5.9 and 6.4 per cent
Wind and Solar
Hydro
Energy Transition
During 2021, the Company recognized asset impairment
charges in the Energy Transition segment as a result of the
decision to suspend the Sundance Unit 5 repowering
project ($191 million) and planned retirements of Keephills
Unit 1, effective Dec. 31, 2021 ($94 million), and Sundance
Unit 4, effective April 1, 2022 ($56 million). Keephills Unit 1
and Sundance Unit 4 impairment assessments were based
on the estimated salvage values of these units, which were
in excess of the expected economic benefits from these
units. For the Sundance Unit 5 repowering project, the
recoverable amount was determined based on estimated
fair value less costs of disposal of selling the assets under
construction and estimated salvage value for the balance
of the costs. The fair value measurement for assets under
construction is categorized as a Level III fair value
measurement. The total remaining estimated recoverable
for Sundance Unit 5
amount and salvage values
repowering project was $33 million. Discounting did not
have a material impact on these asset impairments. The
asset retirement and project suspension decisions were
based on the Company's assessment of future market
conditions, the age and condition of in-service units, as
well as TransAlta's strategic focus toward renewable
energy solutions.
During 2021, with the expected closure of the Highvale
mine at the end of 2021, it was determined that the
estimated salvage value of the Highvale mine exceeded its
economic benefit to the Alberta Merchant CGU. The asset
was removed from the Alberta Merchant CGU for
impairment purposes and was assessed for impairment as
an individual asset, which resulted in the recognized
impairment charge of $195 million in the Energy Transition
segment, with
to
salvage value.
the asset being written down
Corporate
Energy Transfer Canada, formerly SemCAMS Midstream
ULC, purported to terminate the agreements related to the
development and construction of the Kaybob Cogeneration
Project. As a result, during the first quarter of 2021, the
Company recorded impairment charges of $27 million in
the Corporate segment as this facility was not yet
operational. The recoverable amount was based on
estimated fair value less costs of disposal of reselling the
equipment purchased to date. During the fourth quarter of
2022, the dispute was settled. The Company reversed
$2 million of the impairment loss previously recognized.
TransAlta Corporation
2023 Integrated Report
F34
8. Net Other Operating (Income) Loss
Net other operating (income) loss includes the following:
2023
2022
(40)
(6)
(1)
—
—
(47)
(40)
(12)
(7)
1
—
(58)
2021
(40)
—
—
34
14
8
Supplier, Other Contract Settlements
and Other
During 2021, $34 million was expensed related to
decisions to suspend the Sundance Unit 5 repowering
project and to retire Keephills Unit 1, including a deferred
asset of $10 million (US$8 million) for which the Company
is unlikely
incur sufficient capital or operating
expenditures to utilize the remaining credit.
to
Onerous Contract Provisions
During 2021, an onerous contract provision for future
royalty payments of $14 million was recognized with the
shutdown of the Highvale mine.
Year ended Dec. 31
Alberta Off-Coal Agreement
Liquidated damages recoverable
Insurance recoveries
Supplier, other contract settlements and other
Onerous contract provisions
Net other operating (income) loss
Alberta Off-Coal Agreement ("OCA")
The Company receives payments from the Government of
Alberta for the cessation of coal-fired emissions on or
before Dec. 31, 2030. Under the terms of the agreement,
the Company receives annual cash payments on or before
July 31 of approximately $40 million ($37 million, net of the
non-controlling
interest related to Sheerness), which
commenced Jan. 1, 2017, and will terminate at the end of
2030. The Company recognizes the off-coal payments
evenly throughout the year. Receipt of the payments is
subject to certain terms and conditions. The OCA’s main
condition is the cessation of all coal-fired emissions on or
before Dec. 31, 2030, which has been achieved effective
Dec. 31, 2021. The affected plants are not, however,
precluded from generating electricity at any time by any
method, other than generation resulting in coal-fired
emissions after Dec. 31, 2030.
Liquidated Damages Recoverable
During 2023, the Company recognized $3 million of
recoverable liquidated damages related to requirements to
be met by the contractor on turbine availability at the
Windrise wind facility (2022 - $12 million) and $3 million for
availability guarantees at other facilities (2022 - nil).
Insurance Recoveries
During 2023, the Company received insurance proceeds of
$1 million related to the replacement costs for the single
tower failure at the Kent Hills wind facilities (2022 -
$7 million).
F35
TransAlta Corporation 2023 Integrated Report
EMG
Skookumchuck
Equity-
accounted
Equity-accounted
Tent
Mountain
Equity-
accounted
EIP
Ekona
Total
FVTPL
FVTOCI
9. Investments
The change in investments is as follows:
Classification
Balance, Dec. 31, 2021
Investment
Equity income (loss)
Distributions received
Changes in foreign
exchange rates
Net change in fair value
recognized in OCI
Balance, Dec. 31, 2022
Investment
Equity income (loss)
Distributions received
Changes in foreign
exchange rates
Balance, Dec. 31, 2023
12
—
(1)
—
1
—
12
—
(4)
—
—
8
Equity-accounted Investments
investments
The Company’s
joint ventures and
associates that are accounted for using the equity method
consist of its investments in Skookumchuck, EMG and Tent
Mountain Renewable Energy Complex (“Tent Mountain”).
in
EMG International, LLC ("EMG")
interest
TransAlta holds a 30 per cent
in EMG, a
wastewater treatment processing company. Earnings are
derived from the design and construction of wastewater
treatment facilities. During 2022, the contingent purchase
price consideration of US$3.5 million was paid, which was
calculated based on actual earnings metrics achieved in
2021 and did not differ from the estimated amount
included in the initial purchase price.
Skookumchuck Wind Project
TransAlta holds a 49 per cent membership interest in SP
Skookumchuck Investment, LLC. Skookumchuck is a 136.8
MW wind project located in Lewis and Thurston counties
near Centralia in Washington state. The project has a 20-
year PPA with Puget Sound Energy.
93
—
10
(5)
7
—
—
—
—
—
—
—
10
—
—
1
—
2
—
—
—
105
12
9
(5)
9
—
—
(1)
(1)
105
—
11
1
129
—
8
(6)
(3)
104
10
—
—
—
10
4
—
—
—
15
—
—
—
—
1
14
4
(6)
(3)
138
Tent Mountain Pumped Hydro
Development Project
land
rights,
included
On April 24, 2023, the Company acquired a 50 per cent
interest in Tent Mountain, an early-stage 320 MW pumped
hydro energy storage development project, located in
southwest Alberta, from Evolve Power Ltd. ("Evolve"),
formerly known as Montem Resources Limited. The
acquisition
fixed assets and
intellectual property associated with the pumped hydro
development project. The Company paid Evolve
approximately $8 million on closing and made additional
investments of $2 million during the balance of 2023.
Additional contingent payments of up to $17 million may
become payable to Evolve based on the achievement of
specific development and commercial milestones. The
Company and Evolve jointly control Tent Mountain, with
the result that the Company accounts for its interest in the
joint venture as an investment using the equity method.
TransAlta Corporation
2023 Integrated Report
F36
Summarized financial information on the results of operations relating to the Company’s pro-rata interests in
Skookumchuck, EMG and Tent Mountain, is as follows:
Year ended Dec. 31
Results of operations
Revenues and other operating income
Expenses
Proportionate share of net earnings
Other Investments
Energy Impact Partners
On May 6, 2022, the Company entered into a commitment
to invest US$25 million over the next four years in Energy
Impact Partners ("EIP") Deep Decarbonization Frontier
Fund 1 (the “Frontier Fund”). The investment in the Frontier
Fund provides the Company with a portfolio approach to
investing in emerging technologies and the opportunity to
identify, pilot, commercialize and bring to market emerging
technologies that will facilitate the transition to net-zero
emissions. The investment is accounted for at FVTPL.
10. Interest Expense
The components of interest expense are as follows:
Interest on debt
Interest on exchangeable debentures (Note 25)
Interest on exchangeable preferred shares (Note 25)
Capitalized interest (Note 18)
Interest on lease liabilities
Credit facility fees, bank charges and other interest
Tax shield on tax equity financing (Note 24)
Accretion of provisions (Note 23)
Interest expense
2023
2022
2021
22
(18)
4
24
(15)
9
19
(10)
9
Ekona Power Inc.
On Feb. 1, 2022, the Company made an equity investment
of $2 million in Ekona's Class B Preferred Shares. The
investment will help support the commercialization of
Ekona’s novel methane pyrolysis technology platform,
which is being developed to produce cleaner and lower-
cost turquoise hydrogen. The Company has irrevocably
elected to measure its investment in Ekona at FVTOCI.
2023
203
29
28
(57)
9
21
—
48
2022
164
2021
163
29
28
(16)
7
27
(2)
49
29
28
(14)
7
20
(9)
32
281
286
256
F37
TransAlta Corporation 2023 Integrated Report
11. Income Taxes
Consolidated Statements of Earnings
I. Rate Reconciliation
Year ended Dec. 31
Earnings (loss) before income taxes
Net earnings attributable to non-controlling interests not subject to tax
Adjusted earnings (loss) before income taxes
Statutory Canadian federal and provincial income tax rate (%)
Expected income tax expense (recovery)
Increase (decrease) in income taxes resulting from:
Differences in effective foreign tax rates
Non-deductible expense(1)
Taxable capital (gain) loss
Deferred income tax recovery related to temporary difference on investment
in subsidiaries
Write-down (reversal of write-down) of unrecognized deferred income tax
assets
Statutory and other rate differences
Adjustments in respect of deferred income tax of previous years
Other
Income tax expense
Effective tax rate (%)
2023
880
(80)
800
2022
353
(94)
259
2021
(380)
(33)
(413)
23.4%
23.4%
23.6%
187
61
(98)
9
58
(2)
(3)
(1)
130
18
(2)
4
—
—
—
(178)
(24)
134
1
1
11
84
(3)
6
7
192
4
(4)
5
45
11%
74%
(11%)
(1) This amount is related to current and prior period tax adjustments in the US to mitigate cash tax relating to the Base Erosion and Anti-Abuse Tax.
TransAlta Corporation
2023 Integrated Report
F38
II. Components of Income Tax Expense
The components of income tax expense are as follows:
Year ended Dec. 31
Current income tax expense
Deferred income tax expense (recovery) related to the origination and
reversal of temporary differences
Deferred income tax recovery related to temporary difference on investment
in subsidiaries
Write-down (reversal of write-down) of unrecognized deferred income
tax assets(1)
Income tax expense
Current income tax expense
Deferred income tax expense (recovery)
Income tax expense
2023
50
215
2022
65
153
2021
56
(145)
(3)
(2)
—
(178)
(24)
134
84
50
34
84
192
65
127
192
45
56
(11)
45
(1) During the year ended Dec. 31, 2023, the Company recognized deferred tax assets of $178 million (2022 - $24 million, 2021 - $134 million write-down).
The deferred income tax assets mainly relate to the tax benefits associated with tax losses related to the Company's directly owned US operations and
other deductible differences. The Company has not recognized an additional $157 million of deferred tax assets on the basis that it is not probable that
sufficient future taxable income would be available to utilize these tax assets.
Consolidated Statements of Changes in Equity
The aggregate current and deferred income tax related to items charged or credited to equity are as follows:
Year ended Dec. 31
Income tax expense (recovery) related to:
Net impact related to cash flow hedges
Net impact related to hedges of foreign operations
Net impact related to net actuarial gains (losses)
Transaction costs for the acquisition of TransAlta Renewables
Income tax expense (recovery) reported in equity
2023
2022
2021
27
1
(1)
(2)
25
(112)
(57)
(3)
12
—
—
11
—
(103)
(46)
F39
TransAlta Corporation 2023 Integrated Report
Consolidated Statements of Financial Position
Significant components of the Company’s deferred income tax assets (liabilities) are as follows:
As at Dec. 31
Non-capital losses(1)
Future decommissioning and restoration costs
Property, plant and equipment
Risk management assets and liabilities, net
Employee future benefits and compensation plans
Foreign exchange differences on US-denominated debt
Other taxable temporary differences
Net deferred income tax asset (liability), before write-down of deferred income tax assets
Unrecognized deferred income tax assets
Net deferred income tax liability, after write-down of deferred income tax assets
2023
88
111
(605)
144
50
12
(8)
(208)
(157)
(365)
(1) Non-capital losses expire between 2033 and 2043. Net operating losses from US operations have no expiration.
The net deferred income tax liability is presented in the Consolidated Statements of Financial Position as follows:
As at Dec. 31
Deferred income tax assets(1)
Deferred income tax liabilities
Net deferred income tax liability
2023
21
(386)
(365)
2022
244
119
(553)
193
48
13
(5)
59
(361)
(302)
2022
50
(352)
(302)
(1) The deferred income tax assets presented on the Consolidated Statements of Financial Position are recoverable based on estimated future earnings
and tax planning strategies. The assumptions used in the estimate of future earnings are based on the Company’s long-range forecasts.
Contingencies
As of Dec. 31, 2023, the Company had recognized a net liability of nil (2022 – nil) related to uncertain tax positions.
TransAlta Corporation
2023 Integrated Report
F40
12. Non-Controlling Interests
The Company’s subsidiaries and operations that have non-controlling interests are as follows:
Subsidiary / Operation
Non-controlling interest owner
TransAlta
Cogeneration LP
Canadian Power Holdings Inc.
Kent Hills Wind LP
Natural Forces Technologies Inc.
TransAlta Renewables Inc.
Public shareholders
Non-controlling interest as
at Dec. 31, 2023
Non-controlling interest as at
Dec. 31, 2022
49.99%
17%
nil(1)
49.99%
17%
39.9%
(1) Non-controlling interest from Jan. 1, 2023 to Oct. 4, 2023 was 39.9%.
TransAlta Cogeneration, LP (“TA Cogen”) operates a
portfolio of cogeneration facilities in Canada and owns 50
per cent of a dual-fuel generating facility.
Kent Hills Wind LP owns and operates the 167 MW Kent
Hills (1, 2 and 3) wind facilities located in New Brunswick.
Kent Hills Wind LP is a subsidiary of TransAlta Renewables
Inc. ("TransAlta Renewables").
TransAlta Renewables owns a portfolio of gas and
renewable power generation facilities in Canada and owns
economic interests in various other gas and renewable
TA Cogen
Year ended Dec. 31
Revenues
Net earnings and total comprehensive income
Amounts attributable to the non-controlling interest:
Net earnings
Total comprehensive income
Distributions paid to Canadian Power Holdings Inc.
As at Dec. 31
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Total equity
Equity attributable to Canadian Power Holdings Inc.
Non-controlling interest share (per cent)
F41
TransAlta Corporation 2023 Integrated Report
facilities of the Company. On Oct. 5, 2023, the Company
acquired all of the outstanding common shares of
TransAlta Renewables not already owned, directly or
its affiliates.
indirectly, by TransAlta and certain of
TransAlta Renewables at Dec. 31, 2023, is a wholly owned
subsidiary of
for
more details.
the Company. Refer
to Note 4
Summarized financial information relating to subsidiaries
with significant non-controlling interests is as follows:
2023
290
121
80
80
148
2022
347
143
91
91
87
2023
43
193
(41)
(34)
(161)
(79)
2021
265
103
62
62
56
2022
127
253
(62)
(27)
(291)
(147)
49.99
49.99
Kent Hills Wind LP
Prior to Oct 5, 2023, financial information related to the 17 per cent non-controlling interest in Kent Hills Wind LP was
included in the financial information disclosed in TransAlta Renewables in this note.
Year ended Dec. 31
Revenues
Net earnings and total comprehensive income
Amounts attributable to the non-controlling interest:
Net earnings and total comprehensive income
2023(1)
7
2
—
(1) This represents financial information from Oct. 5, 2023 to Dec. 31, 2023. The net earnings attributable to non-controlling interest in Kent Hills Wind LP
prior to Oct. 5, 2023, is included in the disclosures for TransAlta Renewables.
As at Dec. 31
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Total equity
Equity attributable to non-controlling interests
Non-controlling interest share (per cent)
TransAlta Renewables
2023
35
481
(42)
(188)
(285)
(48)
17
The financial information disclosed below includes the 17 per cent non-controlling interest in Kent Hills Wind LP until
Oct. 5, 2023.
Year ended Dec. 31
Revenues
Net earnings
Total comprehensive income (loss)
Amounts attributable to the non-controlling interests:
Net earnings
Total comprehensive income (loss)
Distributions paid to non-controlling interests
2023(1)
303
56
(7)
21
(4)
75
2022
560
74
(67)
20
(36)
100
2021
470
139
66
50
21
100
(1) Non-controlling interest share prior the close of the transaction on Oct. 5, 2023. This represents financial information from Jan. 1, 2023 to Oct. 4, 2023.
TransAlta Corporation
2023 Integrated Report
F42
As at Dec. 31
Current assets
Long-term assets
Current liabilities
Long-term liabilities
Total equity
Equity attributable to non-controlling interests
Non-controlling interests’ share (per cent)
13. Trade and Other Receivables and Accounts Payable
2022
240
2,989
(306)
(1,118)
(1,805)
(732)
39.9
2022
1,165
304
52
4
64
2023
600
145
19
1
42
807
1,589
2023
772
16
9
2022
1,069
17
260
797
1,346
As at Dec. 31
Trade accounts receivable
Collateral provided (Note 15)
Current portion of finance lease receivables (Note 17)
Loan receivable (Note 22)
Income taxes receivable
Trade and other receivables
As at Dec. 31
Accounts payable and accrued liabilities
Interest payable
Collateral held (Note 15)
Accounts payable and accrued liabilities
F43
TransAlta Corporation 2023 Integrated Report
14. Financial Instruments
A. Financial Assets and Liabilities — Classification and Measurement
Financial assets and financial liabilities are measured on an ongoing basis at cost, fair value or amortized cost.
Derivatives
used for
hedging
Derivatives
held for
trading
(FVTPL)
Other
financial
assets
(FVTPL)
Other
financial
assets
(FVOCI)
Amortized
cost
Carrying value as at Dec. 31, 2023
Financial assets
Cash and cash equivalents(1)
Restricted cash
Trade and other receivables
Long-term portion of finance lease
receivables
Long-term portion of loan receivable(2)
Other investments(3)
Risk management assets
Current
Long-term
Financial liabilities
Bank overdraft
Accounts payable and accrued liabilities
Dividends payable
Risk management liabilities
Current
Long-term
Credit facilities, long-term debt and lease
liabilities(4)
Exchangeable securities
(1)
Includes cash equivalents of nil.
(2)
Included in other assets. Refer to Note 22.
(3)
Included in investments. Refer to Note 9.
(4)
Includes current portion.
—
—
—
—
—
—
—
—
—
—
—
125
80
—
—
—
—
—
—
—
—
151
52
—
—
—
189
194
—
348
69
807
171
25
—
—
—
3
797
49
—
—
3,466
—
744
—
—
—
—
—
15
—
—
—
—
—
—
—
—
—
Total
348
69
807
171
25
16
151
52
3
797
49
314
274
—
—
—
—
—
1
—
—
—
—
—
—
—
—
3,466
—
744
TransAlta Corporation
2023 Integrated Report
F44
Carrying value as at Dec. 31, 2022
Financial assets
Cash and cash equivalents(1)
Restricted cash
Trade and other receivables
Long-term portion of finance lease
receivables
Long-term portion of loan receivable(2)
Other investments(3)
Risk management assets
Current
Long-term
Financial liabilities
Bank overdraft
Accounts payable and accrued liabilities
Dividends payable
Risk management liabilities
Current
Long-term
Credit facilities, long-term debt and
lease liabilities(4)
Derivatives
used for
hedging
Derivatives
held for
trading
(FVTPL)
Other
financial
assets
(FVTPL)
Other
financial
assets
(FVTOCI)
Total
Amortized
cost
—
—
—
—
—
—
—
—
—
—
—
271
76
—
—
—
—
—
—
—
709
161
—
—
—
858
257
1,134
70
1,589
129
33
—
—
—
16
1,346
68
—
—
—
3,653
—
—
—
—
—
11
—
—
—
—
—
—
—
—
—
1,134
—
70
— 1,589
—
129
—
1
33
12
—
—
709
161
—
16
— 1,346
—
68
—
1,129
—
333
— 3,653
Exchangeable securities
—
—
739
—
—
739
(1)
Includes cash equivalents of nil.
(2)
Included in other assets. Refer to Note 22.
(3)
Included in investments. Refer to Note 9.
(4)
Includes current portion.
B. Fair Value of Financial Instruments
I. Level I, II and III Fair Value Measurements
The fair value of a financial instrument is the price that
would be received when selling the asset or paid to
transfer the associated liability in an orderly transaction
between market participants at the measurement date. Fair
values can be determined by observing quoted prices for
the instrument in active markets to which the Company has
access. In the absence of an active market, the Company
determines fair values based on valuation models or by
reference to other similar products in active markets.
Fair values determined using valuation models require the
use of assumptions. In determining those assumptions, the
Company looks primarily to external readily observable
market inputs. However, if not available, the Company uses
inputs that are not based on observable market data.
The Level I, II and III classifications in the fair value
hierarchy utilized by the Company are defined below. The
fair value measurement of a financial instrument is included
in only one of the three levels, the determination of which
is based on the lowest level input that is significant to the
derivation of the fair value. The Level III classification is the
lowest level classification in the fair value hierarchy.
a. Level I
Fair values are determined using inputs that are quoted
prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access at the
measurement date. In determining Level I fair values, the
Company uses quoted prices for
identically traded
commodities obtained from active exchanges such as the
New York Mercantile Exchange.
F45
TransAlta Corporation 2023 Integrated Report
b. Level II
Fair values are determined, directly or indirectly, using
inputs that are observable for the asset or liability.
II category are
Fair values falling within the Level
determined through the use of quoted prices in active
markets, which in some cases are adjusted for factors
specific to the asset or liability, such as basis, credit
valuation and location differentials.
The Company’s commodity risk management Level II
financial instruments include over-the-counter derivatives
with values based on observable commodity futures
curves and derivatives with inputs validated by broker
quotes or other publicly available market data providers.
Level II fair values are also determined using valuation
techniques, such as option pricing models and
are
interpolation
readily observable.
formulas, where
inputs
the
In determining Level II fair values of other risk management
assets and liabilities, the Company uses observable inputs
other than unadjusted quoted prices that are observable
for the asset or liability, such as interest rate yield curves
and currency rates. For certain financial instruments where
insufficient trading volume or lack of recent trades exists,
the Company relies on similar interest or currency rate
inputs and other
information such as
credit spreads.
third-party
c. Level III
Fair values are determined using inputs for the assets or
liabilities that are not readily observable.
The Company may enter into commodity transactions for
which market-observable data is not available. In these
cases, Level III fair values are determined using valuation
techniques such as mark-to-forecast and mark-to-model.
For mark-to-model valuations, derivative pricing models,
regression-based models and scenario analysis simulation
models may be employed. The model inputs may be based
on historical data such as unit availability, transmission
congestion, demand profiles for individual non-standard
deals and structured products and/or volatility and
correlations between products derived from historical price
relationships. For assets and liabilities that are recognized
at fair value on a recurring basis, the Company determines
whether transfers have occurred between levels in the
hierarchy by re-assessing categorization (based on the
lowest level input that is significant to the fair value
measurement as a whole) at
the end of each
reporting period.
The Company also has various commodity contracts with
terms that extend beyond a liquid trading period. As
forward market prices are not available for the full period of
these contracts, the value of these contracts is derived by
reference to a forecast that is based on a combination of
external and internal fundamental modelling, including
discounting. As a result, these contracts are classified
in Level III.
II. Commodity Risk Management Assets
and Liabilities
Commodity risk management assets and liabilities include
risk management assets and liabilities that are used in the
energy marketing and generation segments in relation to
trading activities and certain contracting activities. To the
extent applicable, changes in net risk management assets
and liabilities for non-hedge positions are reflected within
earnings of these businesses.
risk management assets and
Commodity
liabilities
classified by fair value levels as at Dec. 31, 2023, are as
follows: Level I – $13 million net liability (Dec. 31, 2022 –
$23 million net asset), Level II – $244 million net liability
(Dec. 31, 2022 – $173 million net asset) and Level III – $147
million net
(Dec. 31, 2022 – $782 million
net liability).
liability
Significant changes in commodity net risk management
assets (liabilities) during the year ended Dec. 31, 2023, are
primarily attributable to contract settlements and volatility
in market prices across multiple markets on both existing
contracts and new contracts.
TransAlta Corporation
2023 Integrated Report
F46
The following table summarizes the key factors impacting the fair value of the Level III commodity risk management
assets and liabilities by classification during the years ended Dec. 31, 2023 and 2022, respectively:
Opening balance
Changes attributable to:
Year ended Dec. 31, 2023
Year ended Dec. 31, 2022
Hedge
Non-hedge
(347)
(435)
Total Hedge
(782)
285
Non-hedge
Total
(126)
159
Market price changes on existing contracts
(123)
(6)
(129)
(611)
(298)
(909)
Market price changes on new contracts
—
18
18
Contracts settled
Change in foreign exchange rates
Transfers out of Level III(1)
256
9
205
269
525
7
16
—
205
—
(38)
17
—
(124)
(124)
118
(5)
80
12
— —
Net risk management assets (liabilities) at end of year
—
(147)
(147)
(347)
(435)
(782)
Additional Level III information:
Losses recognized in other comprehensive loss
Total gains (losses) included in earnings before income
taxes
Unrealized gains (losses) included in earnings before
income taxes relating to net assets (liabilities) held at
year end
(114)
(256)
—
19
(114)
(594)
(237)
38
—
(594)
(427)
(389)
—
288
288
—
(309)
(309)
(1) The Company has a long-term fixed price power sale contract in the US for delivery of power. The fair value of this instrument was transferred out of
Level III to Level II as at Dec. 31, 2023 as the forward price curve is now based on observable market prices for the remaining duration of the contract.
The Company has a Commodity Exposure Management
Policy that governs both the commodity transactions
undertaken in its proprietary trading business and those
undertaken to manage commodity price exposures in its
generation business. This Policy defines and specifies the
controls and management responsibilities associated with
commodity trading activities, as well as the nature and
frequency of required reporting of such activities.
as
trading
The Company's risk management department determines
methodologies and procedures regarding commodity risk
management Level III fair value measurements. Level III fair
values are primarily calculated within the Company’s
risk management processes. These
energy
calculations are based on underlying contractual data as
well
inputs.
and
Development of non-observable inputs requires the use of
judgment. To ensure reasonability, the Level III fair value
measurements are reviewed and validated by the risk
management and finance departments. Review occurs
formally on a quarterly basis or more frequently if daily
review and monitoring procedures identify unexpected
changes to fair value or changes to key parameters.
non-observable
observable
III risk management
As at Dec. 31, 2023, the total Level III risk management
asset balance was $56 million (Dec. 31, 2022 – $31 million)
and Level
liability balance was
$203 million (Dec. 31, 2022 – $813 million). The net risk
management liabilities decreased mainly due to market
price changes and settled contracts. The information on
risk management contracts or groups of risk management
contracts that are included in Level III measurements and
inputs and sensitivities are
the related unobservable
outlined in the following table. These include the effects on
fair value of discounting,
liquidity and credit value
adjustments; however, the potential offsetting effects of
Level II positions are not considered. Sensitivity ranges for
the base fair values are determined using reasonably
possible alternative assumptions for the key unobservable
inputs, which may include forward commodity prices,
volatility in commodity prices and correlations, delivery
volumes, escalation rates and cost of supply.
F47
TransAlta Corporation 2023 Integrated Report
As at
Dec. 31, 2023
Description
Valuation technique Unobservable input
Reasonably possible change
Sensitivity(1)
Coal transportation – US Numerical
Volatility
80% to 120%
Full requirements –
Eastern US
derivative valuation
Rail rate escalation
zero to 10%
Scenario analysis
Volume
96% to 104%
Cost of supply
Decrease of $2.30 per MWh
or increase of $2.40 per MWh
Long-term wind energy
sale – Eastern US
Long-term price
forecast
Illiquid future power prices
(per MWh)
Price decrease
or increase of US$6
Illiquid future REC prices
(per unit)
Price decrease of US$12
or increase of US$8
Wind discounts
0% decrease or 9% increase
Long-term wind energy
sale – Canada
Long-term price
forecast
Illiquid future power prices
(per MWh)
Price decrease of C$81
or increase of C$5
Long-term wind energy
sale - Central US
Long-term price
forecast
Illiquid future power prices
(per MWh)
Price decrease of US$1
or increase of US$2
Wind discounts
5% decrease or 2% increase
Wind discounts
16% decrease or 5% increase
+6
-4
+3
-3
+24
-28
+65
-23
+81
-36
(1) Sensitivity represents the total increase or decrease in recognized fair value that could arise from the use of the reasonably possible changes of all
unobservable inputs.
TransAlta Corporation
2023 Integrated Report
F48
As at
Description
Valuation
technique
Dec. 31, 2022
Unobservable input
Reasonably possible change
Sensitivity(1)
Coal transportation – US Numerical
derivative valuation
Illiquid future power prices
(per MWh)
Price decrease of US$5
or increase of US$55
Full requirements -
Eastern US
Volatility
80% to 120%
Rail rate escalation
zero to 10%
Scenario analysis
Volume
96% to 104%
Cost of supply
Decrease of US$0.50 per MWh
or increase of US$3.30 per
MWh
Long-term wind energy
sale – Eastern US
Long-term price
forecast
Illiquid future power prices
(per MWh)
Price decrease
or increase of US$6
Illiquid future REC prices
(per unit)
Price decrease
or increase of US$2
Wind discounts
0% decrease or 5% increase
Long-term wind energy
sale – Canada
Long-term price
forecast
Illiquid future power prices
(per MWh)
Price decrease of C$85
or increase of C$5
Wind discounts
28% decrease or 5% increase
Long-term wind energy
sale – Central US
Long-term price
forecast
Illiquid future power prices
(per MWh)
Price decrease
or increase of US$2
Long-term power
sale – US
Long-term price
forecast
Illiquid future power prices
(per MWh)
Price decrease of US$5
or increase of US$55
Wind discounts
2% decrease or 5% increase
+14
-13
+3
-21
+22
-18
+47
-25
+74
-28
+15
-163
(1) Sensitivity represents the total increase or decrease in recognized fair value that would arise from the use of the reasonably possible changes of all
unobservable inputs.
a. Coal Transportation – US
The Company has a coal rail transport agreement that
includes an upside sharing mechanism until Dec. 31, 2025.
Option pricing techniques have been utilized to value the
obligation
of
the agreement.
associated with
component
this
The key unobservable inputs used in the valuation include
option volatility and rail rate escalation. Option volatility
and rail rate escalation ranges have been determined
based on historical data and professional judgment.
In the first three quarters of 2023, non-liquid power prices
were also used as a key unobservable input. At Dec. 31,
2023, the relevant forward power prices were observable
in the market.
b. Full Requirements – Eastern US
The Company has a portfolio of full requirement service
contracts, whereby the Company agrees to supply specific
utility customer needs for a range of products that may
include electrical energy, capacity, transmission, ancillary
services,
("RECs") and
independent system operator costs.
renewable energy credits
F49
TransAlta Corporation 2023 Integrated Report
The key unobservable inputs used in the portfolio valuation
include delivered volume and supply cost. Hourly shaping
of consumption will result in a realized cost that may be at
the average
a premium
settled price.
(or discount)
relative
to
is party to a
c. Long-Term Wind Energy Sale – Eastern US
The Company
long-term contract for
differences ("CFD") for the offtake of 100 per cent of the
generation from its 90 MW Big Level wind facility. The CFD,
together with the sale of electricity generated into the PJM
Interconnection at the prevailing real-time energy market
price, achieve the fixed contract price per MWh on proxy
generation. Under the CFD, if the market price is lower
than the fixed contract price the customer pays the
Company the difference and if the market price is higher
than the fixed contract price the Company refunds the
difference to the customer. The customer is also entitled to
the physical delivery of environmental attributes. The
contract matures in December 2034. The contract is
accounted for as a derivative. Changes in fair value are
presented in revenue.
The key unobservable inputs used in the valuation of the
contract are expected proxy generation volumes and non-
liquid forward prices for power, RECs and wind discounts.
d. Long-Term Wind Energy Sale – Canada
The Company is party to two Virtual Power Purchase
Agreements ("VPPAs") for the offtake of 100 per cent of
the generation from its 130 MW Garden Plain wind facility.
The VPPAs, together with the sale of electricity generated
into the Alberta power market at the pool price, achieve
the fixed contract prices per MWh. Under the VPPAs, if the
pool price is lower than the fixed contract price the
customer pays the Company the difference and if the pool
price is higher than the fixed contract price the Company
refunds the difference to the customer. The customers are
also entitled to the physical delivery of environmental
attributes. Both VPPAs commenced on commercial
operation of the facility which was achieved in August
2023, and extend for a weighted average of approximately
17 years.
The energy components of these contracts are accounted
for as derivatives. Changes in fair value are presented
in revenue.
The key unobservable inputs used in the valuations of the
contracts are the non-liquid forward prices for power and
monthly wind discounts.
e. Long-Term Wind Energy Sale – Central US
The Company is party to two long-term VPPAs for the
offtake of 100 per cent of the generation from its 300 MW
White Rock East and White Rock West wind power
projects. The VPPAs, together with the sale of electricity
generated into the US Southwest Power Pool ("SPP")
market at the relevant price nodes, achieve the fixed
contract prices per MWh. Under the VPPAs, if the SPP
pricing is lower than the fixed contract price the customers
pay the Company the difference, and if the SPP pricing is
higher than the fixed contract price, the Company refunds
the difference to the customers. The customer is also
entitled
the physical delivery of environmental
attributes. During the fourth quarter of 2023, the Company
and the customer for the White Rock wind projects
amended the associated VPPAs. The VPPAs commence on
commercial operation of the facilities.
to
The Company is also party to a VPPA for the offtake of 100
per cent of the generation from its 200 MW Horizon Hill
wind power project. The VPPA, together with the sale of
electricity generated into the SPP market at the relevant
price node, achieve the fixed contract price per MWh.
Under the VPPA, if the SPP pricing is lower than the fixed
contract price the customer pays the Company the
difference and if the SPP pricing is higher than the fixed
contract price the Company refunds the difference to the
customer. The customer remains entitled to the physical
delivery of environmental attributes. During the second
quarter of 2023, the Company and the customer for the
Horizon Hill wind project amended the associated VPPA.
The VPPA commences on commercial operation of the
facility. Commissioning of the Horizon Hill wind project is
expected during the first quarter of 2024.
The energy components of these contracts are accounted
for as derivatives. Changes in fair value are presented in
revenue. The amendments to the Horizon Hill and White
Rock VPPAs did not change the nature of the contracts
and the energy components continue to be accounted for
as derivatives.
The key unobservable inputs used in the valuation of the
contracts are the non-liquid forward prices for power and
wind discounts.
f. Long-Term Power Sale – US
The Company has a long-term fixed price power sale
contract in the US for delivery of power at the following
capacity levels: 380 MW through Dec. 31, 2024, and 300
MW through Dec. 31, 2025. The contract is designated as
an all-in-one cash flow hedge.
At Dec. 31, 2023, the contract was transferred to Level II
as all significant inputs were observable. In the first three
quarters of 2023, the term of the transaction extended
beyond where the relevant forward power prices were
observable in the market.
III. Other Risk Management Assets
and Liabilities
Other risk management assets and liabilities primarily
include risk management assets and liabilities that are used
in managing exposures on non-energy marketing
transactions such as interest rates, the net investment in
foreign operations and other foreign currency risks. Hedge
accounting is not always applied.
Other risk management assets and liabilities with a total
net asset fair value of $19 million as at Dec. 31, 2023 (Dec.
31, 2022 – $6 million net liability) are classified as Level II
fair value measurements. The changes in other net risk
management assets and liabilities during the year ended
Dec. 31, 2023, are attributable to favourable market price
foreign
changes on existing contracts,
exchange rates on new contracts entered into during
2023, and contracts settled during 2023.
favourable
TransAlta Corporation
2023 Integrated Report
F50
IV. Other Financial Assets and Liabilities
The fair value of financial assets and liabilities measured at other than fair value is as follows:
Fair value(1)
Level I
Level II
Level III
Exchangeable securities — Dec. 31, 2023
Long-term debt — Dec. 31, 2023
Loan receivable — Dec. 31, 2023
—
—
—
718
3,104
26
Total
carrying
value(1)
744
Total
718
—
—
3,104
3,323
—
26
26
Exchangeable securities — Dec. 31, 2022
—
685
—
685
739
Long-term debt — Dec. 31, 2022
Loan receivable — Dec. 31, 2022
(1)
Includes current portion.
The fair values of the Company’s debentures, senior notes
and exchangeable securities are determined using prices
observed in secondary markets. Non-recourse and other
long-term debt fair values are determined by calculating an
implied price based on a current assessment of the yield
to maturity.
The carrying amount of other short-term financial assets
and liabilities (cash and cash equivalents, restricted cash,
receivable, collateral provided, bank
trade accounts
overdraft, accounts payable and accrued
liabilities,
collateral held and dividends payable) approximates fair
value due to the liquid nature of the asset or liability. The
fair values of the finance lease receivables approximate
the carrying amounts as the amounts receivable represent
cash flows from repayments of principal and interest.
C. Inception Gains and Losses
The majority of derivatives traded by the Company are
based on adjusted quoted prices on an active exchange or
extend beyond the time period for which exchange-based
As at Dec. 31
Unamortized net loss at beginning of year
New inception gains (losses)(1)
Change resulting from amended contract(2)
Change in foreign exchange rates
Amortization recorded in net earnings during the year
Unamortized net gain (loss) at end of year
—
3,200
— 3,200
3,518
—
37
—
37
37
loss at
that are not
III valuation techniques used.
quotes are available. The fair values of these derivatives
are determined using
readily
inputs
observable. Refer to section B of this Note 14 above for fair
In some
value Level
instances, a difference may arise between the fair value of
a financial instrument at initial recognition (the “transaction
price”) and the amount calculated through a valuation
is
model. This unrealized gain or
recognized in net earnings (loss) only if the fair value of the
instrument is evidenced by a quoted market price in an
active market, observable current market transactions that
are substantially the same, or a valuation technique that
uses observable market inputs. Where these criteria are
not met, the difference is deferred on the Consolidated
Statements of Financial Position in risk management assets
or liabilities and is recognized in net earnings (loss) over
the term of the related contract. The difference between
the transaction price and the fair value determined using a
valuation model, yet to be recognized in net earnings (loss)
and a reconciliation of changes is as follows:
inception
2023
(213)
47
190
6
(27)
3
2022
(131)
(37)
—
(10)
(35)
(213)
2021
(33)
(79)
—
—
(19)
(131)
(1) During 2023, the Company entered into long-term fixed price power sale contracts with certain of its US customers and as a result recognized day one
inception gains that are based on the forward price curve at the inception of the contract. During 2022, the Company entered into a PPA for the Horizon
Hill wind project (2021 – PPAs for the White Rock wind projects) that resulted in new inception losses due to the difference between the fixed PPA price
and future estimated market prices. There are other key factors, such as project economics and incentives, that influence the long-term power price for
renewable projects outside of the power price curve, which is not liquid for the majority of the duration of the PPA.
(2) During 2023, the Company entered into certain contract amendments related to the Horizon Hill and White Rock wind projects. These amendments
were mainly specific to obtaining price increases over the contract term. Accordingly, certain inception loss calibration adjustments were recognized
within the risk management liability.
F51
TransAlta Corporation 2023 Integrated Report
the
relationship between
At the inception of the hedge relationship, the Company
documents
the hedging
instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking
various hedge transactions. At the inception of the hedge
and on an ongoing basis, the Company also documents
whether the hedging instrument is effective in offsetting
changes in fair values or cash flows of the hedged item
attributable to the hedged risk, which is when the hedging
hedge
of
relationships meet
effectiveness requirements:
following
the
all
• There is an economic relationship between the hedged
item and the hedging instrument;
• The effect of credit risk does not dominate the value
changes that result from that economic relationship; and
• The hedge ratio of the hedging relationship is the same
as that resulting from the quantity of the hedged item
that the Company actually hedges and the quantity of
the hedging instrument that the entity actually uses to
hedge that quantity of hedged item.
If a hedging relationship ceases to meet the hedge
effectiveness requirement relating to the hedge ratio, but
the risk management objective for that designated hedging
relationship remains the same, the Company adjusts the
hedge ratio of the hedging relationship so that it continues
to meet the qualifying criteria.
15. Risk Management Activities
A. Risk Management Strategy
The Company is exposed to market risk from changes in
commodity prices, foreign exchange rates, interest rates,
credit risk and
liquidity risk. These risks affect the
Company’s earnings and the value of associated financial
instruments that the Company holds. In certain cases, the
Company seeks to minimize the effects of these risks by
using derivatives to hedge
its risk exposures. The
Company’s risk management strategy, policies and controls
are designed to ensure that the risks it assumes comply
with
its
risk tolerance.
internal objectives and
the Company’s
two primary streams of
risk
The Company has
management activities: (i) financial exposure management;
and (ii) commodity exposure management. Within these
activities,
include
commodity risk, interest rate risk, liquidity risk, equity price
risk and foreign currency risk.
for management
identified
risks
The Company seeks to minimize the effects of commodity
risk, interest rate risk and foreign currency risk by using
derivative financial instruments to hedge risk exposures. Of
these derivatives,
the Company may apply hedge
accounting to those hedging commodity price risk, interest
rate risk and foreign currency risk.
The use of financial derivatives is governed by the
Company’s policies approved by the Board, which provide
written principles on commodity risk, interest rate risk,
liquidity risk, equity price risk and foreign currency risk, as
well as the use of financial derivatives and non-derivative
financial instruments.
Liquidity risk, credit risk and equity price risk are managed
through means other than derivatives or hedge accounting.
The Company enters into various derivative transactions as
well as other contracting activities that do not qualify for
hedge accounting or where a choice was made not to
apply hedge accounting. As a result, the related assets and
liabilities are classified as derivatives at fair value through
profit and loss. The net realized and unrealized gains or
losses from changes in the fair value of these derivatives
are
the
reported
change occurs.
in net earnings
the period
in
The Company designates certain derivatives as hedging
instruments to hedge commodity price risk, foreign
currency exchange risk in cash flow hedges and hedges of
net investments in foreign operations. Hedges of foreign
exchange risk on firm commitments are accounted for as
cash flow hedges.
TransAlta Corporation
2023 Integrated Report
F52
B. Net Risk Management Assets and Liabilities
Aggregate net risk management assets (liabilities) are as follows:
As at Dec. 31, 2023
Commodity risk management
Current
Long-term
Net commodity risk management liabilities
Other
Current
Long-term
Net other risk management assets
Total net risk management liabilities
As at Dec. 31, 2022
Commodity risk management
Current
Long-term
Net commodity risk management liabilities
Other
Current
Long-term
Net other risk management liabilities
Total net risk management liabilities
Cash flow
hedges
Not
designated
as a hedge
Total
(125)
(80)
(205)
—
—
—
(53)
(178)
(146)
(226)
(199)
(404)
15
4
19
15
4
19
(205)
(180)
(385)
Cash flow
hedges
Not
designated
as a hedge
Total
(271)
(76)
(347)
—
—
—
(143)
(414)
(96)
(172)
(239)
(586)
(6)
—
(6)
(6)
—
(6)
(347)
(245)
(592)
F53
TransAlta Corporation 2023 Integrated Report
Netting Arrangements
Information about the Company’s financial assets and liabilities that are subject to enforceable master netting
arrangements or similar agreements is as follows:
As at Dec. 31, 2023
Current risk management assets
Long-term risk management assets
Current risk management liabilities
Long-term risk management liabilities
Trade and other receivables(2)
Accounts payable and accrued
liabilities(2)
Gross amounts
of recognized
financial assets
(liabilities)
Amounts
set off
Net amounts
included on the
statement of
financial
position
Master netting
arrangements(1)
Net amount
528
161
(504)
(145)
(355)
(91)
355
91
789
(646)
(760)
646
173
70
(149)
(54)
143
(114)
(7)
(2)
7
2
(11)
11
166
68
(142)
(52)
132
(103)
As at Dec. 31, 2022
Current risk management assets
Long-term risk management assets
Gross amounts of
recognized
financial assets
(liabilities)
Amounts
set off
Net amounts
included on the
statement of
financial
position
1,602
(883)
204
(43)
719
161
Current risk management liabilities
(1,953)
883
(1,070)
Long-term risk management liabilities
(449)
43
Trade and other receivables(2)
Accounts payable and accrued
liabilities(2)
1,330
(934)
(1,344)
934
(406)
396
(410)
Master netting
arrangements(1)
Net amount
(62)
(7)
62
7
(176)
176
657
154
(1,008)
(399)
220
(234)
(1) Amounts not set off in the Consolidated Statements of Financial Position.
(2) The trade and other receivables and accounts payable and accrued liabilities include amounts related to collateral provided and held. Refer to
Note 15(F) below for further details.
TransAlta Corporation
2023 Integrated Report
F54
i. Commodity Price Risk Management – Proprietary Trading
The Company’s Energy Marketing segment conducts
proprietary trading activities and uses a variety of
instruments to manage risk, earn trading revenue and gain
market information.
In compliance with the Commodity Exposure Management
Policy, proprietary trading activities are subject to limits
and controls, including VaR limits. The Board approves the
limit for total VaR from proprietary trading activities. VaR is
the most commonly used metric employed to track and
manage the market risk associated with trading positions.
A VaR measure gives, for a specific confidence level, an
estimated maximum pre-tax loss that could be incurred
over a specified period of time. VaR is used to determine
the potential change in value of the Company’s proprietary
trading portfolio, over a three-day period within a 95 per
cent confidence
level, resulting from normal market
fluctuations. VaR is estimated using the historical variance/
covariance approach. VaR is a measure that has certain
inherent limitations. The use of historical information in the
estimate assumes that price movements in the past will be
indicative of future market risk. As such, it may only be
meaningful under normal market conditions. Extreme
market events are not addressed by this risk measure. In
addition, the use of a three-day measurement period
implies that positions can be unwound or hedged within
three days, although this may not be possible if the market
becomes illiquid.
Changes in market prices associated with proprietary
trading activities affect net earnings in the period that the
price changes occur. VaR at Dec. 31, 2023, associated with
the Company’s proprietary trading activities was $4 million
(2022 – $4 million, 2021 - $2 million).
ii. Commodity Price Risk – Generation
The generation segments utilize various commodity
contracts to manage the commodity price risk associated
with electricity generation, fuel purchases, emissions and
byproducts, as considered appropriate. A Commodity
Exposure Management Policy is prepared and approved
annually, which outlines the intended hedging strategies
associated with the Company’s generation assets and
related commodity price risks. Controls also
include
restrictions on authorized
instruments, management
reviews on individual portfolios and approval of asset
transactions that could add potential volatility to the
Company’s reported net earnings.
C. Nature and Extent of Risks Arising from
Financial Instruments
I. Market Risk
a. Commodity Price Risk Management
The Company has exposure to movements in certain
commodity prices in both its electricity generation and
proprietary trading businesses, including the market price
of electricity and fuels used to produce electricity. Most of
the Company’s electricity generation and related fuel
supply contracts are considered to be contracts for
delivery or receipt of a non-financial item in accordance
with the Company’s expected own use requirements and
are not considered to be financial instruments. As such, the
discussion related to commodity price risk is limited to the
Company’s proprietary trading business, the VPPAs and
that are derivatives and
other
in hedging relationships
commodity derivatives used
associated
electricity
Company’s
with
generating activities.
long-term contracts
the
To mitigate the risk of adverse commodity price changes,
the Company uses three tools:
• A framework of risk controls;
• A predefined hedging plan, including fixed price financial
power swaps and
long-term physical power sale
contracts to hedge commodity price for electricity
generation; and
• A committee dedicated to overseeing the risk and
compliance program
the
existence of appropriate controls, processes, systems
and procedures to monitor adherence to the program.
trading and ensuring
in
The Company has executed commodity price hedges for
its Centralia thermal facility, including a long-term physical
power sale contract, and may, at times, execute hedges for
its electricity price exposure in Alberta using fixed price
financial swaps or other similar instruments. Both hedging
strategies fall under the Company’s risk management
strategy used to hedge commodity price risk.
Market risk exposures are measured using Value at Risk
("VaR") supplemented by sensitivity analysis. There has
been no change to the Company’s exposure to market risks
or the manner in which these risks are managed or
measured. Position sizes and trade strategies were
adjusted to remain within the Company's risk framework.
F55
TransAlta Corporation 2023 Integrated Report
instruments used
VaR at Dec. 31, 2023, associated with the Company’s
commodity derivative
in generation
hedging activities was $23 million (2022 – $97 million, 2021
– $33 million). For positions and economic hedges that do
not meet hedge accounting requirements or for short-term
optimization transactions such as buybacks entered into to
offset existing hedge positions, these transactions are
marked to the market value with changes in market prices
associated with these transactions affecting net earnings
in the period in which the price change occurs. VaR at Dec.
31, 2023, associated with these transactions was $16
million (2022 – $45 million, 2021 – $34 million). For the
market risk related to long-term power sale and long-term
wind energy sales contracts, refer to the Level
III
measurements table and the related unobservable inputs
and sensitivities in Note 14(B)(II).
iii. Commodity Price Risk Management – Hedges
At Dec. 31, 2023, the Company had no outstanding
commodity derivative instruments designated as hedging
instruments, except for the long-term power sale - US
contract. For further details on this contract, refer to Note
14(B)(II)(i).
iv. Commodity Price Risk Management – Non-Hedges
The Company’s outstanding commodity derivative
instruments not designated as hedging instruments are
as follows:
As at Dec. 31
Type
(thousands)
Electricity (MWh)
Natural gas (GJ)
Transmission (MWh)
Emissions (MWh)
Emissions (tonnes)
Coal (tonnes)
2023
2022
Notional
amount
sold
54,043
50,949
—
212
4,450
—
Notional
amount
purchased
Notional
amount
sold
Notional
amount
purchased
12,628
55,821
13,934
209,348
23,464
162,384
856
804
5,125
5,172
—
274
300
1,643
2,297
300
—
7,746
TransAlta Corporation
2023 Integrated Report
F56
b. Interest Rate Risk Management
Changes in interest rates can impact the Company’s
borrowing costs and cost of capital. Changes in the cost of
capital could affect the feasibility of new growth initiatives.
Interest rate risk also arises as the fair value of future cash
flows from a financial instrument fluctuates because of
changes in market interest rates.
The Company's syndicated credit facility, Term Facility
("Term Facility") and the Poplar Creek non-recourse bond
are the only debt instruments subject to floating interest
rates, which represent 14 per cent of the Company’s total
long-term debt as at Dec. 31, 2023 (2022 – 15 per cent).
Interest rate risk is managed with the use of derivatives.
Interbank Offered Rate reform could impact interest rate
risk with respect to the Company's credit facilities and the
Poplar Creek non-recourse bond held by a TransAlta
subsidiary. The term and credit facilities with $400 million
outstanding (2022 – $433 million) reference the Canadian
Dollar Offered Rate ("CDOR") for Canadian-dollar drawings,
but include appropriate fallback language to replace this
benchmark rate in the event of a benchmark transition. The
Poplar Creek non-recourse bond with a face value as at
Dec. 31, 2023 of $86 million (2022 – $95 million) pays
interest based upon the three-month CDOR. Cessation of
the three-month CDOR is anticipated to occur mid-2024.
c. Currency Rate Risk
The Company has exposure to various currencies, such as
the US dollar and the Australian dollar, as a result of
investments and operations in foreign jurisdictions, the net
earnings from those operations and the acquisition of
equipment and services from foreign suppliers.
The Company may enter into the following hedging
strategies to mitigate currency rate risk, including:
• Foreign exchange forward contracts to mitigate adverse
changes in foreign exchange rates on project-related
in
expenditures
foreign currencies;
distributions
received
and
• Foreign exchange forward contracts and cross-currency
swaps to manage foreign exchange exposure on foreign-
denominated debt not designated as a net investment
hedge; and
• Designating foreign currency debt as a hedge of the net
investment in foreign operations to mitigate the risk due
to
to certain
foreign subsidiaries.
fluctuating exchange
related
rates
The Company's target is to hedge a minimum of 60 per
cent of our forecasted foreign operating cash flows over a
four-year period. The US exposure will be managed with a
combination of interest expense on our US-denominated
debt and forward foreign exchange contracts and the
Australian exposure will be managed with a combination of
interest expense on our Australian-dollar denominated
debt and forward foreign exchange contracts.
i. Net Investment Hedges
When designating foreign currency debt as a hedge of the
Company’s net investment in foreign subsidiaries, the
Company has determined that the hedge is effective if the
foreign currency of the net investment is the same as the
currency of the hedge and therefore an economic
relationship is present.
The Company’s hedges of its net investment in foreign
operations were comprised of US-dollar-denominated
long-term debt with a face value of US$370 million (2022 –
US$370 million).
ii. Non-Hedges
The Company also uses foreign currency contracts to
manage its expected foreign operating cash flows and
foreign exchange forward contracts to manage foreign
exchange exposure on foreign-denominated debt not
designated as a net investment hedge. Hedge accounting
is not applied to these foreign currency contracts.
As at Dec. 31
Notional
amount
sold
Notional
amount
purchased
2023
Fair value
asset
(liability)
2022
Notional
amount
sold
Notional
amount
purchased
Fair value
asset
(liability)
Maturity
Maturity
Foreign exchange forward contracts – foreign-denominated receipts/expenditures
AUD125
CAD113
(1)
2024-2027
AUD183
CAD168
(1)
2023-2026
USD828
CAD1,113
USD100
AUD152
19
5
2024-2027
USD573
CAD761
(12)
2023-2025
2024
USD66
AUD102
4
3
2023
2023
Foreign exchange forward contracts – foreign-denominated debt
CAD190
USD140
(4)
2024
CAD159
USD120
F57
TransAlta Corporation 2023 Integrated Report
iii. Impacts of Currency Rate Risk
The possible effect on net earnings and OCI, due to
changes
in foreign exchange rates associated with
financial instruments denominated in currencies other than
the Company’s functional currency, is outlined below.
The sensitivity analysis has been prepared using
management’s assessment that an average three cents
(2022 – three cents, 2021 – three cents) increase or
decrease in these currencies relative to the Canadian
the
is a
dollar
next quarter.
reasonable potential change over
Year ended Dec. 31
2023
2022
2021
Currency
USD
AUD
Total
Net earnings
decrease(1)
OCI gain(1)(2)
Net earnings
increase
(decrease)(1)
OCI gain(1)(2)
Net earnings
decrease(1)
OCI gain(1)(2)
(11)
(3)
(14)
—
—
—
(12)
(2)
(14)
—
—
—
(13)
1
(12)
1
—
1
(1) These calculations assume an increase in the value of these currencies relative to the Canadian dollar. A decrease would have the opposite effect.
(2) The foreign exchange impact related to financial instruments designated as hedging instruments in net investment hedges has been excluded.
II. Credit Risk
Credit risk is the risk that customers or counterparties will
cause a financial loss for the Company by failing to
discharge their obligations and the risk to the Company
associated with changes in creditworthiness of entities
with which commercial exposures exist. The Company
actively manages its exposure to credit risk by assessing
the ability of counterparties to fulfil their obligations under
the related contracts prior to entering into such contracts.
The Company makes detailed assessments of the credit
quality of all counterparties and, where appropriate,
obtains corporate guarantees, cash collateral, third-party
credit insurance and/or letters of credit to support the
ultimate collection of these receivables. For commodity
trading and origination, the Company sets strict credit
limits for each counterparty and monitors exposures on a
daily basis. TransAlta uses standard agreements that allow
for the netting of exposures and often include margining
provisions. If credit limits are exceeded, TransAlta will
request collateral from the counterparty or halt trading
activities with the counterparty.
The Company uses external credit ratings, as well as
internal ratings in circumstances where external ratings are
not available, to establish credit limits for customers and
counterparties. The following table outlines the Company’s
maximum exposure to credit risk without taking into
account collateral held, including the distribution of credit
ratings, as at Dec. 31, 2023:
Trade and other receivables(1)
Long-term finance lease receivable
Risk management assets(1)
Loans receivable(2)
Total
Investment grade
(per cent)
Non-investment grade
(per cent)
Total
(per cent)
Total
amount
95
100
75
—
5
—
25
100
100
100
100
100
807
171
203
26
1,207
(1) Letters of credit and cash and cash equivalents are the primary types of collateral held as security related to these amounts.
(2)
Includes $26 million loans receivable included within other assets with counterparties that have no external credit rating.
An impairment analysis is performed at each reporting date
using a provision matrix to measure expected credit losses.
The provision rates are based on segment historical rates
of default of trade receivables as well as incorporating
forward-looking credit ratings and forecasted default rates.
In addition to the calculation of expected credit losses,
TransAlta monitors key forward-looking information as
potential indicators that historical bad debt percentages,
forward-looking S&P credit ratings and forecasted default
the
rates would no longer be representative of future expected
credit losses. The calculation reflects the probability-
weighted outcome,
time value of money and
reasonable and supportable information that is available at
the reporting date about past events, current conditions
and forecasts of future economic conditions. TransAlta
evaluates the concentration of risk with respect to trade
receivables as low, as its customers are located in several
jurisdictions and industries.
TransAlta Corporation
2023 Integrated Report
F58
The Company did not have material expected credit losses
as at Dec. 31, 2023.
additional $411 million of scheduled non-recourse debt
principal payments.
The Company’s maximum exposure to credit risk at Dec.
31, 2023, without taking into account collateral held or
right of set-off, is represented by the current carrying
amounts of receivables and risk management assets as per
the Consolidated Statements of Financial Position. Letters
of credit and cash are the primary types of collateral held
as security related to these amounts. The maximum credit
exposure to any one customer for commodity trading
operations and hedging, including the fair value of open
trading, net of any collateral held, at Dec. 31, 2023, was
$23 million (Dec. 31, 2022 – $64 million).
III. Liquidity Risk
Liquidity risk relates to the Company’s ability to access
capital to be used for capital projects, debt refinancing,
proprietary trading activities, commodity hedging and
general corporate purposes. As at Dec. 31, 2023, TransAlta
maintains an investment grade rating from one credit rating
agency and one notch below investment grade ratings
from two credit rating agencies. Between 2024 and 2026,
the Company has $400 million of debt maturing, and an
Collateral is posted based on negotiated terms with
counterparties, which can include the Company’s senior
unsecured credit rating as determined by certain major
credit rating agencies. Certain of the Company’s derivative
instruments contain financial assurance provisions that
require collateral to be posted only if a material adverse
credit-related event occurs.
to
TransAlta manages liquidity risk by monitoring liquidity on
trading positions; preparing and revising
longer-term
financing plans to reflect changes in business plans and
the market availability of capital; reporting liquidity risk
exposure for proprietary trading activities on a regular
basis
the Risk Management Committee, senior
management and the Audit, Finance and Risk Committee
(on behalf of the Board); and maintaining sufficient
undrawn committed credit
lines to support potential
liquidity requirements. The Company does not use
derivatives or hedge accounting to manage liquidity risk. A
maturity analysis of the Company's financial liabilities is
as follows:
2024
2025
2026
2027
2028
Bank overdraft
Accounts payable and accrued liabilities
Long-term debt(1)
Credit facilities(1)
Debentures
Senior notes
Non-recourse – Hydro
Non-recourse – Wind & Solar
Non-recourse and other – Gas
Tax equity financing
Exchangeable securities(2)
3
797
400
—
—
—
66
46
14
—
—
—
—
—
—
—
69
58
15
—
Commodity risk management liabilities
169
123
(16)
4
(3)
4
Other risk management assets
Lease liabilities(3)
Interest on long-term debt and lease
liabilities(4)
Interest on exchangeable securities(2)(4)
Dividends payable
Total
—
—
—
—
—
—
67
61
15
—
15
—
4
—
—
—
—
—
—
70
65
18
—
12
—
4
—
—
—
—
—
—
75
66
21
—
12
—
4
2029 and
thereafter
—
—
Total
3
797
—
400
251
251
924
924
39
39
289
636
707
1,003
27
750
73
—
110
750
404
(19)
123
143
186
167
158
151
143
711
1,516
53
49
53
—
53
—
53
—
53
—
13
—
278
49
1,771
486
373
373
374
3,907
7,284
(1) Excludes impact of hedge accounting and derivatives.
(2) Cash payment could occur after Dec. 31, 2028 if exchangeable securities are not exchanged by Brookfield Renewable Partners or its affiliates
(collectively "Brookfield"). At Brookfield's option, the exchangeable securities can be exchanged, at the earliest, on Jan. 1, 2025 (Note 25).
(3) Lease liabilities exclude a lease incentive of $12 million expected to be received in 2024, which is recognized in trade and other receivables.
(4) Not recognized as a financial liability on the Consolidated Statements of Financial Position.
F59
TransAlta Corporation 2023 Integrated Report
IV. Equity Price Risk
Total Return Swaps
The Company has certain compensation, deferred and
restricted share unit programs, the values of which depend
on the common share price of the Company. The Company
has fixed a portion of the settlement cost of these
programs by entering into a total return swap for which
hedge accounting has not been applied. The total return
swap is cash settled every quarter based upon the
difference between the fixed price and the market price of
the Company’s common shares at the end of each quarter.
D. Hedging Instruments – Uncertainty of Future Cash Flows
The following table outlines the terms and conditions of derivative hedging instruments and how they affect the amount,
timing and uncertainty of future cash flows:
2024
2025
2026
2027
2028
2029
Maturity
Cash flow hedges
Commodity derivative instruments
Electricity
Notional amount (thousands of MWh)
3,338
2,628
Average price ($ per MWh)
78.18
80.13
—
—
—
—
—
—
—
—
E. Effects of Hedge Accounting on the Financial Position and Performance
I. Effect of Hedges
The impact of the hedging instruments on the statement of financial position is as follows:
Notional
amount
Carrying
amount
Line item in the statement of
financial position
Change in fair value
used for measuring
ineffectiveness
5,966
(205)
Risk management liabilities
(114)
As at Dec. 31, 2023
Commodity price risk
Cash flow hedges
Physical power sales(1)
Foreign currency risk
Net investment hedges
Foreign-denominated debt
USD370
CAD489
Credit facilities, long-term debt
and lease liabilities
—
(1)
In thousands of MWh.
TransAlta Corporation
2023 Integrated Report
F60
As at Dec. 31, 2022
Commodity price risk
Cash flow hedges
Physical power sales(1)
Foreign currency risk
Net investment hedges
Notional
amount
Carrying
amount
Line item in the statement of
financial position
Change in fair value
used for measuring
ineffectiveness
9,295
(347)
Risk management liabilities
(594)
Foreign-denominated debt
USD370
CAD502
Credit facilities, long-term
debt and lease liabilities
—
(1)
In thousands of MWh.
The impact of the hedged items on the statement of financial position is as follows:
2023
2022
Change in fair value
used for measuring
ineffectiveness
Cash flow
hedge
reserve(1)
Change in fair value
used for measuring
ineffectiveness
Cash flow
hedge
reserve(1)
As at Dec. 31
Commodity price risk
Cash flow hedges
Power forecast sales – Centralia
(114)
(129)
(594)
(279)
Change in fair value
used for measuring
ineffectiveness
Foreign
currency
translation
reserve(1)
Change in fair value
used for measuring
ineffectiveness
Foreign
currency
translation
reserve(1)
Foreign currency risk
Net investment hedges
Net investment in foreign subsidiaries
—
(36)
—
(39)
(1) Net of tax. Included in AOCI.
The hedging gain or loss recognized in OCI before tax is equal to the change in fair value used for measuring
effectiveness for the net investment hedge. There is no ineffectiveness recognized in profit or loss.
The impact of designated cash flow hedges on OCI and net earnings is:
Year ended Dec. 31, 2023
Effective portion
Ineffective portion
Pre-tax
gain
recognized
in OCI
Location of gain
reclassified from OCI
Pre-tax
(gain) loss
reclassified
from OCI
Location of (gain) loss
reclassified from OCI
51 Revenue
83 Revenue
—
Interest expense
(8)
Interest expense
Derivatives in cash flow
hedging relationships
Commodity contracts
Forward starting interest
rate swaps
OCI impact
51 OCI impact
75 Net earnings impact
Pre-tax
(gain) loss
recognized
in earnings
—
—
—
F61
TransAlta Corporation 2023 Integrated Report
Over the next 12 months, the Company estimates that
approximately $89 million of after-tax losses will be
reclassified from AOCI to net earnings. These estimates
assume constant natural gas and power prices, interest
rates and exchange rates over time; however, the actual
amounts that will be reclassified may vary based on
changes in these factors.
Year ended Dec. 31, 2022
Effective portion
Ineffective portion
Derivatives in cash flow
hedging relationships
Pre-tax
gain (loss)
recognized
in OCI
Location of (gain) loss
reclassified
from OCI
Pre-tax
(gain) loss
reclassified
from OCI
Location of (gain) loss
reclassified from OCI
Pre-tax
(gain) loss
recognized
in earnings
Commodity contracts
(747) Revenue
124 Revenue
Forward starting interest
rate swaps
53
Interest expense
2
Interest expense
OCI impact
(694) OCI impact
126 Net earnings impact
—
—
—
Year ended Dec. 31, 2021
Effective portion
Ineffective portion
Derivatives in cash flow
hedging relationships
Pre-tax
gain (loss)
recognized
in OCI
Location of (gain) loss
reclassified
from OCI
Pre-tax
(gain) loss
reclassified
from OCI
Location of (gain) loss
reclassified from OCI
Pre-tax
(gain) loss
recognized
in earnings
Commodity contracts
(268) Revenue
(13) Revenue
Foreign exchange
forwards on project
hedges
Forward starting interest
rate swaps
— Property, plant and
1 Foreign exchange
equipment
(gain) loss
13
Interest expense
4
Interest expense
OCI impact
(255) OCI impact
(8) Net earnings impact
—
—
—
—
II. Effect of Non-Hedges
F. Collateral
For the year ended Dec. 31, 2023, the Company
recognized a net unrealized loss of $44 million (2022 – loss
of $384 million, 2021 – gain of $97 million) related to
commodity derivatives.
For the year ended Dec. 31, 2023, a gain of $11 million
(2022 – gain of $20 million, 2021 – gain of $6 million)
related to foreign exchange and other derivatives was
recognized, which consists of net unrealized gains of
$27 million (2022 – loss of $11 million, 2021 – gain of
$4 million) and net realized losses of $16 million (2022 –
gains
of
$2 million), respectively.
$31 million,
gains
2021
of
–
I. Financial Assets Provided as Collateral
At Dec. 31, 2023, the Company provided $145 million (Dec.
31, 2022 – $304 million) in cash and cash equivalents as
collateral to regulated clearing agents as security for
commodity trading activities. These funds are held in
segregated accounts by the clearing agents. Collateral
provided is included within trade and other receivables in
the Consolidated Statements of Financial Position. At Dec.
31, 2023, the Company provided $19 million (Dec. 31, 2022
- $6 million) in surety bonds as security for commodity
trading activities.
TransAlta Corporation
2023 Integrated Report
F62
III. Contingent Features in Derivative
Instruments
Collateral is posted in the normal course of business based
on the Company’s senior unsecured credit rating as
determined by certain major credit rating agencies. Certain
of the Company’s derivative instruments contain financial
assurance provisions that require collateral to be posted
only if a material adverse credit-related event occurs.
At Dec. 31, 2023, the Company had posted collateral of
$392 million (Dec. 31, 2022 – $820 million) in the form of
letters of credit on physical and financial derivative
transactions in a net liability position. Certain derivative
agreements contain credit-risk-contingent features, which
if triggered could result in the Company having to post an
additional $154 million (Dec. 31, 2022 – $594 million) of
collateral to its counterparties.
2023
2022
72
38
45
2
83
43
27
4
157
157
In June 2023, the Company settled the 2022 carbon
compliance obligation in cash. The compliance price of
carbon for the 2022 obligation settled was $50 per tonne.
It increased to $65 per tonne in 2023.
During 2022, the Company utilized 1,169,333 emission
credits with a carrying value of $35 million to settle the
2021 carbon compliance obligation of $47 million. The
difference of $12 million was recognized as a reduction in
the Company's carbon compliance costs in 2022.
II. Financial Assets Held as Collateral
At Dec. 31, 2023, the Company held $9 million (Dec. 31,
2022 – $260 million) in cash collateral associated with
counterparty obligations. Under the terms of the contracts,
the Company may be obligated to pay interest on the
outstanding balances and to return the principal when the
counterparties have met their contractual obligations or
when the amount of the obligation declines as a result of
changes
the
counterparties on the collateral received is calculated in
accordance with each contract. Collateral held is related to
physical and financial derivative transactions in a net asset
position and is included in accounts payable and accrued
liabilities
of
Financial Position.
in market value.
Interest payable
Consolidated
Statements
the
to
in
16. Inventory
The components of inventory are as follows:
As at Dec. 31
Parts, materials and supplies
Coal
Emission credits
Natural gas
Total
No inventory was pledged as security for liabilities.
As at Dec. 31, 2023, the Company holds 962,548 emission
credits in inventory that were purchased externally with a
recorded book value of $45 million (Dec. 31, 2022 –
963,068 emission credits with a recorded book value of
$27 million). The Company also has 3,121,837 (Dec. 31,
2022 – 3,619,450) of internally generated eligible emission
credits from the Company's Wind and Solar and Hydro
segments which have no recorded book value. This
includes the eligible emission performance credits earned
by the Alberta Hydro facilities formerly under dispute that
has now been resolved. Refer to Note 36 for details.
Emission credits can be sold externally or can be used to
offset future emission obligations from our gas facilities
located in Alberta, where the compliance price of carbon is
expected to increase, resulting in a reduced cash cost for
carbon compliance in the year of settlement.
F63
TransAlta Corporation 2023 Integrated Report
17. Finance Lease Receivables
Amounts receivable under the Company’s finance leases include the Northern Goldfields solar facilities (2023), the Poplar
Creek cogeneration facility (2023 and 2022) and the Southern Cross Energy facilities (2022), and are as follows:
As at Dec. 31
Within one year
Second to fifth years inclusive
More than five years
Less: unearned finance lease income
Total finance lease receivables
Included in the Consolidated Statements of Financial Position as:
Current portion of finance lease receivables (Note 13)
Long-term portion of finance lease receivables
Total finance lease receivables
2023
2022
Minimum
lease
receipts
Present value
of minimum
lease
receipts
Minimum
lease
receipts
Present value
of minimum
lease
receipts
55
75
51
181
—
181
28
112
117
257
67
190
19
171
190
28
98
64
190
—
190
62
81
60
203
22
181
52
129
181
On Nov. 22, 2023, the Northern Goldfields solar facilities achieved commercial operation. As a result, the Company
derecognized assets under construction and recognized a finance lease receivable of $61 million.
TransAlta Corporation
2023 Integrated Report
F64
18. Property, Plant and Equipment
A reconciliation of the changes in the carrying amount of PP&E is as follows:
Assets under
construction
Land
Hydro
Wind and
Solar
Gas
generation
Energy
Transition
Capital spares
and other(1)
Total
Cost
As at Dec. 31, 2021
Additions(2)
Additions from development projects
Disposals
Impairment (charges) reversals (Note 7)
Changes to decommissioning and restoration
costs (Note 23)
Retirement of assets
Change in foreign exchange rates
Transfers of assets(3)
As at Dec. 31, 2022
Additions(2)
Disposals
Impairment reversals (Note 7)
Changes to decommissioning and restoration
costs (Note 23)
Retirement of assets
Change in foreign exchange rates
Transfers of assets(3)
Transfers to finance lease receivable (Note 17)
As at Dec. 31, 2023
Accumulated depreciation
As at Dec. 31, 2021
Depreciation
Retirement of assets
Disposals
Change in foreign exchange rates
Transfers of assets(3)
As at Dec. 31, 2022
Depreciation
Retirement of assets
Disposals
Change in foreign exchange rates
Transfers in (out) of PP&E(3)
As at Dec. 31, 2023
Carrying amount
As at Dec. 31, 2021
As at Dec. 31, 2022
As at Dec. 31, 2023
184
891
17
—
2
—
—
13
(144)
963
869
—
—
—
—
(26)
(572)
—
1,234
—
—
—
—
—
—
—
—
—
—
—
—
—
184
963
1,234
96
—
—
(3)
—
—
—
—
—
93
—
(3)
—
—
—
—
—
—
90
—
—
—
—
—
—
—
—
—
—
—
—
—
96
93
90
867
3,276
4,087
4,513
366
13,389
—
—
—
(21)
(15)
—
—
—
(43)
(59)
(9)
(9)
—
18
45
23
—
—
(1)
—
(12)
(12)
(4)
—
—
(216)
—
10
(7)
97
472
(423)
6
12
—
—
2
897
29
(220)
(62)
(74)
(2)
(39)
2
153
(7)
(61)
840
3,233
4,530
3,974
379
14,012
—
—
10
3
(7)
—
38
—
—
—
4
14
(18)
(18)
439
(61)
—
—
—
(22)
(124)
(7)
50
(4)
—
(30)
—
3
(7)
(42)
16
—
6
—
—
(1)
875
(33)
14
(3)
(108)
(264)
(1)
(94)
31
—
2
(65)
884
3,593
4,423
3,914
306
14,444
468
21
1,093
130
(8)
—
—
(3)
(6)
—
11
—
478
25
1,228
129
2,178
308
(10)
(1)
2
335
2,812
342
(4)
(15)
(101)
—
—
—
—
(5)
—
—
(3)
(1)
4,150
180
8,069
63
(7)
(211)
89
(340)
3,744
73
(7)
(30)
(39)
2
16
538
(2)
(33)
—
—
—
(212)
102
(8)
194
8,456
16
585
(108)
(235)
—
—
—
(30)
(47)
1
499
1,337
3,049
3,743
102
8,730
399
362
385
2,183
2,005
2,256
1,909
1,718
1,374
363
230
171
186
5,320
185
5,556
204
5,714
(1)
Includes major spare parts and standby equipment available, but not in service.
(2)
In 2023, the Company capitalized $57 million (2022 – $16 million) of interest to PP&E in at a weighted average rate of 6.3 per cent (2022 – 6.0 per cent).
(3)
Includes transfers of assets upon commissioning to assets in service and other movements.
F65
TransAlta Corporation 2023 Integrated Report
Assets under Construction
During the year, the Company achieved commercial
operations on the Garden Plain wind facility and the
Northern Goldfields solar and battery storage facilities.
Costs were transferred from assets under construction to
the Wind and Solar segment. In addition, the Kent Hills
Foundation Rehabilitation project was substantially
completed and the costs were transferred to the Wind and
Solar segment.
Change in Estimate - Useful Lives
During 2023, the Company adjusted the useful lives of
certain assets in the Gas segment to reflect changes to the
19. Right-of-Use Assets
future operating expectations of the assets. This resulted
in a decrease of $92 million in depreciation expense that
was recognized in the Consolidated Statement of Earnings
(Loss) in 2023.
During 2022, the Company adjusted the useful lives of
certain assets included in the Gas segment to reflect
changes to the future operating expectations of the assets.
This resulted in an increase of $132 million in depreciation
expense
the Consolidated
recognized
Statement of Earnings (Loss) in 2022.
that was
in
The Company leases various properties and types of
equipment. Lease contracts are typically made for fixed
periods. Leases are negotiated on an individual basis and
contain a wide range of terms and conditions.
The lease agreements do not impose covenants, but
leased assets may not be used as security
for
borrowing purposes.
A reconciliation of the changes in the carrying amount of the right-of-use assets is as follows:
As at Dec. 31, 2021
Additions
Depreciation
Change in foreign exchange rates
As at Dec. 31, 2022
Additions
Depreciation
Change in foreign exchange rates
As at Dec. 31, 2023
For the year ended Dec. 31, 2023, TransAlta paid
$19 million (2022 – $16 million) related to recognized lease
liabilities, consisting of $10 million (2022 – $9 million) of
principal repayments and $9 million (2022 – $7 million) of
interest expense.
total
lease payments below
Short-term leases (term of less than 12 months) and leases
the Company's
with
capitalization threshold (low value leases) do not require
recognition as lease liabilities and right-of-use assets. For
the year ended Dec. 31, 2023, the Company expensed
$1 million (2022 – $2 million and 2021 – nil) related to
short-term and low value leases.
Land
Buildings
Vehicles
Equipment
Total
68
36
(4)
2
102
2
(5)
(2)
97
20
—
(5)
—
15
2
(5)
—
12
1
1
—
—
2
1
—
—
3
6
3
(2)
—
7
—
(2)
—
5
95
40
(11)
2
126
5
(12)
(2)
117
Some of the Company's land leases that met the definition
of a lease were not recognized as they require variable
payments based on production or revenue.
Additionally, certain land leases require payments to be
made on the basis of the greater of the minimum fixed
payments and variable payments based on production or
revenue. For these leases, lease liabilities have been
recognized on the basis of the minimum fixed payments.
For the year ended Dec. 31, 2023, the Company expensed
$8 million (2022 – $8 million and 2021 – $6 million) in
variable land lease payments for these leases.
TransAlta Corporation
2023 Integrated Report
F66
20. Intangible Assets
A reconciliation of the changes in the carrying amount of intangible assets is as follows:
Power sale
contracts
Software
and other
Intangibles under
development
Coal rights
Total
Cost
As at Dec. 31, 2021
Additions
Change in foreign exchange rates
Transfers
As at Dec. 31, 2022
Additions
Asset impairment charges
Change in foreign exchange rates
Transfers
As at Dec. 31, 2023
Accumulated amortization
As at Dec. 31, 2021
Amortization
Change in foreign exchange rates
As at Dec. 31, 2022
Amortization
Change in foreign exchange rates
As at Dec. 31, 2023
Carrying amount
As at Dec. 31, 2021
As at Dec. 31, 2022
As at Dec. 31, 2023
269
422
—
3
—
—
3
12
272
437
—
—
(2)
—
270
—
(1)
(2)
12
446
140
299
17
1
26
1
158
326
17
(1)
174
129
114
96
21
(1)
346
123
111
100
4
31
1
(9)
27
13
—
(1)
(12)
27
—
—
—
—
—
—
—
4
27
27
132
827
—
—
—
31
7
3
132
868
—
—
—
—
13
(1)
(5)
—
132
875
132
571
—
—
43
2
132
616
—
—
38
(2)
132
652
—
256
—
252
—
223
F67
TransAlta Corporation 2023 Integrated Report
21. Goodwill
Goodwill acquired through business combinations has been allocated to groups of CGUs that are expected to benefit
from the synergies of the acquisitions. Goodwill by segments is as follows:
As at Dec. 31
Hydro
Wind and Solar
Energy Marketing
Total goodwill
2023
258
176
30
464
2022
258
176
30
464
For the purposes of the 2023 goodwill impairment review,
the Company determined the recoverable amounts of the
Wind and Solar segment by calculating the fair value less
costs of disposal using discounted cash flow projections. In
2023, the Company relied on the recoverable amounts
determined in 2022 for the Hydro and Energy Marketing
segments in performing the 2023 goodwill impairment
review. The recoverable amounts are based on the
Company's long-range forecasts for the periods extending
to the last planned asset retirement in 2072. The resulting
fair value measurements are categorized within Level III of
the fair value hierarchy. No impairment of goodwill arose
for any segment.
The key assumptions impacting the determination of fair
value for the Hydro, Wind and Solar, and Energy Marketing
segments are the following:
• Discount rates used ranged from 5.9 per cent to 8.2 per
cent (2022 – 5.9 per cent to 8.2 per cent).
• Forecasts of electricity production for each facility are
determined taking into consideration contracts for the
sale of electricity, historical production, regional supply-
demand balances and capital maintenance and
expansion plans.
• Forecasts of sales prices for each facility are determined
by taking into consideration contract prices for facilities
subject to long- or short-term contracts, forward price
curves for merchant plants and regional supply-demand
balances. Where forward price curves are not available
for the duration of the facility’s useful life, prices are
determined by extrapolation techniques using historical
industry and company-specific data. Merchant electricity
prices used in the Hydro and Wind and Solar models
ranged between $20 to $238 per MWh during the
forecast period (2022 – $28 to $233 per MWh).
TransAlta Corporation
2023 Integrated Report
F68
22. Other Assets
The components of other assets are as follows:
As at Dec. 31
South Hedland prepaid transmission access and distribution costs
Long-term prepaids and other assets
Project development costs
Loans receivable
Transmission infrastructure
Total Other assets
Included in the Consolidated Statements of Financial Position as:
Total current other assets (Note 13)
Total long-term other assets
Total Other assets
2023
2022
60
41
35
26
18
61
40
10
37
16
180
164
1
179
180
4
160
164
transmission access and
South Hedland prepaid
distribution costs are costs that are amortized on a
straight-line basis over
the South Hedland PPA
contract life.
Long-term prepaids and other assets include the TransAlta
Energy Transition Bill commitment and other contractually
required prepayments and deposits. As part of the
TransAlta Energy Transition Bill signed into law in the State
of Washington and the subsequent Memorandum of
Agreement ("MOA"), the Company committed to fund
US$55 million in total over the remaining life of the
Centralia coal plant to support economic and community
development, promote energy efficiency and develop
energy technologies related to the improvement of the
environment. The MOA contains certain provisions for
termination and in the event of termination and in certain
circumstances, this funding or portion thereof would no
longer be required. As of Dec. 31, 2023, the Company has
fully funded the commitment.
Project development
costs primarily
pre-construction project costs for projects.
include
the
is an unsecured
At Dec. 31, 2023, $25 million of the loans receivable (2022
– $37 million)
loan related to an
advancement by the Company's subsidiary, Kent Hills Wind
LP, of the net financing proceeds of the Kent Hills Wind
Bond ("KH Bonds"), to its 17 per cent partner. The loan
bears interest at 4.55 per cent, with interest payable
quarterly. No scheduled principal repayments are required
until the maturity date of October 2027. However,
repayments may be required for amounts associated with
foundation replacement capital expenditures and for
operating account funding, as outlined in the amendment
made to the KH Bonds. During 2023, the Company
received repayments of $12 million that were required as
part of the waiver and amendment made to the KH Bonds
(2022 - $18 million).
infrastructure was constructed by
Transmission
the
Company and then transferred to a transmission provider
upon completion. The balance relates to the Garden Plain
and Windrise wind facilities and will be amortized to net
earnings (loss) over the useful life of the facilities.
F69
TransAlta Corporation 2023 Integrated Report
23. Decommissioning and Other Provisions
The change in decommissioning and other provision balances is as follows:
Decommissioning and
restoration
Other provisions
Balance, Dec. 31, 2021
Liabilities incurred
Liabilities settled
Accretion
Disposals
Revisions in estimated cash flows
Revisions in discount rates
Reversals
Change in foreign exchange rates
Balance, Dec. 31, 2022
Liabilities incurred
Liabilities settled
Accretion (Note 10)
Revisions in estimated cash flows
Revisions in discount rates
Change in foreign exchange rates
Balance, Dec. 31, 2023
793
1
(35)
49
(5)
95
(225)
—
15
688
1
(37)
47
(89)
52
(6)
656
34
23
(12)
—
—
5
—
(9)
—
41
4
(13)
1
—
—
—
33
Total
827
24
(47)
49
(5)
100
(225)
(9)
15
729
5
(50)
48
(89)
52
(6)
689
Included in the Consolidated Statements of Financial Position as:
As at
Current portion
Non-current portion
Total Decommissioning and other provisions
Dec. 31, 2023
Dec. 31, 2022
35
654
689
70
659
729
TransAlta Corporation
2023 Integrated Report
F70
the decommissioning and
During 2022,
restoration
provision decreased by $225 million due to a significant
increase in discount rates, largely driven by increases in
market benchmark rates. On average, discount rates
increased with rates ranging from 7.0 to 9.7 per cent as at
Dec. 31, 2022. This has resulted in a corresponding
decrease in PP&E of $123 million on operating assets and
the recognition of a $102 million impairment reversal in net
earnings related to retired assets.
At Dec. 31, 2023, the Company has provided a surety bond
in the amount of US$147 million (2022 – US$147 million) in
support of future decommissioning obligations at the
Centralia coal mine. At Dec. 31, 2023, the Company had
provided a surety bond and letters of credit in the amount
of $188 million (2022 – $187 million) in support of future
decommissioning obligations at the Highvale mine.
B. Other Provisions
related
Other provisions include provisions arising from ongoing
to commercial
business activities, amounts
disputes between
the Company and customers or
suppliers and onerous contract provisions. Information
about the expected timing of settlement and uncertainties
that could impact the amount or timing of settlement has
not been provided as this may impact the Company’s
ability
the most
to
favourable manner.
provisions
settle
the
in
A. Decommissioning and Restoration
A provision has been recognized for all generating facilities
and mines for which TransAlta is legally, or constructively,
required to remove the facilities at the end of their useful
lives and restore the sites to their original condition.
TransAlta estimates that the undiscounted amount of cash
flow required to settle these obligations is approximately
$1.7 billion, which will be incurred between 2024 and 2072.
The majority of the costs will be incurred between 2024
and 2050.
the decommissioning and
During 2023,
restoration
provision decreased by $89 million due to revisions in
estimated cash flows and timing of cash flows for certain
Gas and Energy Transition assets. The timing of cash flows
was adjusted to optimize and maximize efficiencies by
staging required reclamation work. Operating assets
included in PP&E decreased by $34 million and $55 million
was recognized as an impairment reversal in net earnings
related to retired assets.
in
During 2023, revisions in discount rates increased the
decommissioning and restoration provision by $52 million
due to a decrease in discount rates, largely driven by
decreases
long-term market benchmark rates. On
average, discount rates decreased compared to 2022, with
rates ranging from 6.0 to 9.0 per cent as at Dec. 31, 2023.
This has resulted in a corresponding increase in PP&E of
$31 million on operating assets and the recognition of a
$21 million impairment charge in net earnings related to
retired assets.
During 2022, the Company accelerated the expected
timing on decommissioning and restoration for certain
the decommissioning and
facilities. This
restoration provision by $95 million, of which $46 million
increased operating assets in PP&E and $49 million was
recognized as an impairment charge in net earnings related
to retired assets.
increased
F71
TransAlta Corporation 2023 Integrated Report
24. Credit Facilities, Long-Term Debt and Lease Liabilities
A. Amounts Outstanding
The amounts outstanding are as follows:
As at Dec. 31
Credit facilities
Segment
Maturity Currency
Carrying
value
Face
value
Interest(1)
Carrying
value
2023
2022
Face
value
Interest
Committed syndicated bank facility(2)
Corporate
Term Facility
Debentures
Corporate
2027
2024
CAD
CAD
7.3% Medium term notes
Corporate
2029
CAD
6.9% Medium term notes
Corporate
2030
CAD
Senior notes(3)
7.8% Senior notes(4)
6.5% Senior notes
Non-recourse
Melancthon Wolfe Wind LP bond
New Richmond Wind LP bond
Kent Hills Wind LP bond
Windrise Wind LP bond
Pingston bond
Corporate
Corporate
Wind & Solar
Wind & Solar
Wind & Solar
Wind & Solar
Hydro
TAPC Holdings LP bond (Poplar Creek) Gas
TEC Hedland PTY Ltd bond(5)
Gas
TransAlta OCP LP bond
Gas
Tax equity financing
Big Level & Antrim(6)
Lakeswind(7)
North Carolina Solar(8)
Other(9)
Total long-term debt
Lease liabilities(10)
Wind & Solar
Wind & Solar
Wind & Solar
Corporate
2029
2040
2028
2032
2033
2041
2043
2030
2042
2030
2029
2029
2028
USD
USD
CAD
CAD
CAD
CAD
CAD
CAD
AUD
CAD
USD
USD
USD
CAD
Total long-term debt and lease liabilities
Less: current portion of long-term debt
Less: current portion of lease liabilities
Total current long-term debt and lease liabilities
Total non-current credit facilities, long-term debt and lease liabilities
—
397
110
141
520
391
168
103
193
164
39
85
691
217
91
10
3
—
—
400
110
141
528
396
169
104
196
167
39
86
699
218
97
10
3
—
—
7.4%
7.3%
6.9%
7.8%
6.5%
3.8%
4.0%
4.5%
3.4%
6.2%
9.4%
4.1%
4.5%
6.6%
10.5%
7.3%
—
32
396
110
141
533
401
202
112
206
170
45
94
711
241
102
15
6
1
33
400
110
141
542
407
203
113
209
173
45
95
720
242
108
15
6
1
4.7%
6.5%
7.3%
6.9%
7.8%
6.5%
3.8%
4.0%
4.5%
3.4%
3.0%
8.9%
4.1%
4.5%
6.6%
10.5%
7.3 %
5.9%
3,323
3,363
3,518
3,563
143
3,466
(526)
(6)
(532)
2,934
135
3,653
(170)
(8)
(178)
3,475
(1)
Interest rate reflects the stipulated rate or the average rate weighted by principal amounts outstanding and is before the effect of hedging.
(2) Composed of bankers’ acceptances and other commercial borrowings under long-term committed credit facilities.
(3) US face value at Dec. 31, 2023 – US$700 million (2022 – US$700 million).
(4) The effective interest rate for the senior notes is 5.98 per cent after the effects of gains realized on settled interest rate hedging instruments.
(5) AU face value at Dec. 31, 2023 – AU$773 million (2022 – AU$786 million).
(6) US face value at Dec. 31, 2023 – US$73 million (2022 – US$79 million).
(7) US face value at Dec. 31, 2023 – US$8 million (2022 – US$11 million).
(8) US face value at Dec. 31, 2023 – US$2 million (2022 – US$5 million).
(9) Other debt consisted of an unsecured commercial loan obligation that matured and was repaid in 2023.
(10) At Dec. 31, 2023, lease liabilities exclude a lease incentive of $12 million expected to be received in 2024, which is recognized in trade and
other receivables.
TransAlta Corporation
2023 Integrated Report
F72
The Company's credit facilities are summarized in the table below:
As at Dec. 31, 2023
Utilized
Credit Facilities
Committed
TransAlta syndicated credit facility
TransAlta bilateral credit facilities
TransAlta Term Facility
Total Committed
Non-Committed
TransAlta demand facilities
Total Non-Committed
Facility
size
Outstanding
letters of credit(1)
Cash
drawings
Available
capacity
Maturity
date
1,950
240
400
2,590
400
400
417
178
—
595
187
187
—
—
400
400
—
—
1,533
Q2 2027
62
—
1,595
213
213
Q2 2025
Q3 2024
N/A
(1) TransAlta has obligations to issue letters of credit and cash collateral to secure potential liabilities to certain parties, including those related to potential
environmental obligations, commodity risk management and hedging activities, pension plan obligations, construction projects and purchase obligations.
Letters of credit drawn against the non-committed facilities reduce the available capacity under the committed syndicated credit facilities. At Dec. 31,
2023, TransAlta provided cash collateral of $145 million.
These facilities are the primary source of short-term
liquidity after
the
Company's business.
flow generated
the cash
from
The acquisition of TransAlta Renewables resulted in the
TransAlta syndicated credit facility increasing by $700
million
effectively
approximately $2.0 billion,
consolidating the TransAlta Renewables syndicated credit
facility into the TransAlta syndicated credit facility. Refer to
Note 4 for more details.
to
letters of credit are
The Company is in compliance with the terms of the credit
facilities and all undrawn amounts are fully available. The
issued from non-
$187 million
committed demand
these obligations are
backstopped and reduce the available capacity on the
committed credit facilities. In addition to the $1.4 billion of
committed capacity available under the credit facilities, the
Company also had $345 million of available cash and
cash equivalents, net of bank overdraft.
facilities;
Senior Notes
On Nov. 15, 2022, the Company repaid the US$400 million
4.5 per cent unsecured senior notes on maturity in addition
to related fees and expenses.
On Nov. 17, 2022, the Company issued US$400 million
senior notes, which have a fixed coupon rate of 7.75 per
cent per annum and mature on Nov. 15, 2029. Including the
effects of settled interest rate swaps, the notes have an
effective yield of approximately 5.982 per cent. The notes
are unsecured and rank equally in right of payment with all
of our existing and future senior indebtedness and senior
in right of payment to all of our future subordinated
indebtedness. The interest payments on the bonds are
made semi-annually, on November 15 and May 15 with the
first payment commencing May 15, 2023. TransAlta is
F73
TransAlta Corporation 2023 Integrated Report
required to allocate an amount equal to the net proceeds
from this offering to finance or, refinance new and/or
existing eligible green projects in accordance with its
Green Bond Framework.
A total of US$370 million (2022 – US$370 million) of the
senior notes have been designated as a hedge of the
Company’s net investment in US operations.
Non-Recourse Debt
On May 8, 2023, the Pingston Power Inc. non-recourse
bond matured with a total aggregate repayment of
$46 million, consisting of accrued interest and principal.
On Sept. 14, 2023, the Company closed a non-recourse
bond financing for approximately $39 million ("Pingston
bond") as a replacement for the non-recourse bond that
matured on May 8, 2023. The Pingston bond is secured by
a first ranking charge over all the respective assets of the
Company's subsidiaries that issued the bonds, amortizes
and bears interest at a rate of 6.145 per cent per annum,
payable semi-annually, and matures on May 8, 2043. The
Pingston bond is subject to customary financing conditions
and covenants that may restrict the Company's ability to
access funds generated by the facility's operations.
Tax Equity
Tax equity financings are typically represented by the
initial equity investments made by the project investors at
each project (net of financing costs incurred), except for
the Lakeswind and North Carolina Solar acquired tax equity
financings, which were initially recognized at their fair
values. Tax equity financing balances are reduced by the
value of
tax
depreciation and investment tax credits) allocated to the
investor and by cash distributions paid to the investor for
their share of net earnings and cash flow generated at
tax benefits
tax credits,
(production
each project. Tax equity financing balances are increased
by interest recognized at the implicit interest rate. The
maturity dates of each financing are subject to change and
are primarily dependent upon when the project investor
achieves the agreed upon targeted rate of return. The
Company anticipates the maturity dates of the tax equity
financings will be: Big Level and Antrim in December 2029;
Lakeswind in March 2029 and North Carolina Solar in
December 2028.
At Dec. 31, 2023, $3 million (AU$3 million) of funds held by
TEC Hedland Pty Ltd are not able to be accessed by other
corporate entities as the funds must be solely used by the
the purpose of paying major
project entities
maintenance costs. Additionally, certain non-recourse
bonds require that certain reserve accounts be established
and funded through cash held on deposit and/or by
providing letters of credit.
for
Other
C. Security
Non-recourse debts totalling $1.4 billion as at Dec. 31,
2023 (2022 – $1.4 billion) are each secured by a first
ranking charge over all of the respective assets of the
Company’s subsidiaries that issued the bonds, which
include PP&E with total carrying amounts of $1.5 billion at
Dec. 31, 2023 (2022 – $1.5 billion) and intangible assets
with total carrying amounts of $61 million (2022 – $70
million). At Dec. 31, 2023, a non-recourse bond of
approximately $85 million (2022 – $94 million) was secured
by a first ranking charge over the equity interests of the
issuer that issued the non-recourse bond.
The TransAlta OCP bonds have a carrying value of $217
million (2022 – $241 million) and are secured by the assets
of TransAlta OCP, including the right to annual capital
contributions and OCA payments from the Government of
Alberta. Under the OCA, the Company receives annual
cash payments on or before July 31 of approximately $40
million (approximately $37 million, net to the Company),
commencing on Jan. 1, 2017 and terminating at the end
of 2030.
TransAlta’s debt has terms and conditions,
including
financial covenants, that are considered normal and
customary. As at Dec. 31, 2023, the Company was in
compliance with all debt covenants.
B. Restrictions Related to Non-Recourse
Debt and Other Debt
The Melancthon Wolfe Wind LP, Pingston Power Inc., TAPC
Holdings LP, New Richmond Wind LP, Kent Hills Wind LP,
TEC Hedland Pty Ltd and Windrise Wind LP non-recourse
bonds and the TransAlta OCP LP bond, with a total
carrying value of $1.7 billion as at Dec. 31, 2023 (2022 –
$1.8 billion) are subject to customary financing conditions
and covenants that may restrict the Company’s ability to
access funds generated by the facilities’ operations. Upon
meeting certain distribution tests, typically performed once
per quarter, the funds are able to be distributed by the
subsidiary entities to their respective parent entity. These
conditions include meeting a debt service coverage ratio
prior to distribution, which was met by these entities in the
fourth quarter of 2023, with the exception of Kent Hills
Wind LP and TAPC Holdings LP. Kent Hills Wind cannot
make any distributions to its partners until the foundation
work is completed. TAPC Holdings LP has been impacted
by higher interest rates in 2023. The funds in these entities
that have accumulated since the fourth quarter test will
remain there until the next debt service coverage ratio can
be calculated in the first quarter of 2024. At Dec. 31, 2023,
$79 million (2022 – $50 million) of cash was subject to
these financial restrictions.
TransAlta Corporation
2023 Integrated Report
F74
D. Principal Repayments
Principal repayments(1)
Lease liabilities(2)
2024
2025
2026
2027
2028
2029 and
thereafter
Total
526
142
143
153
162
2,237 3,363
4
4
4
4
4
123
143
(1) Excludes impact of hedge accounting and derivatives.
(2) Lease liabilities exclude a lease incentive of $12 million, expected to be received in 2024, which is recognized in trade and other receivables.
E. Restricted Cash
G. Currency Impacts
The weakening of the US dollar has decreased the
US-denominated long-term debt balances, mainly the
senior notes and tax equity financing, by $27 million as at
Dec. 31, 2023 (2022 – increased $41 million due to the
strengthening of the US dollar). Almost all of the
US-denominated debt is hedged either through financial
contracts or net investments in the US operations.
Additionally, the weakening of the Australian dollar has
the Australian-denominated non-recourse
decreased
senior secured notes balance by approximately $9 million
as at Dec. 31, 2023 (2022 – $9 million). As this debt is
issued by an Australian subsidiary, the foreign currency
recognized within other
translation
comprehensive income (loss).
impacts
are
As at Dec. 31, 2023, the Company had $17 million (2022 –
$17 million) of restricted cash related to the TransAlta OCP
bonds, which is required to be held in a debt service
reserve account
future debt
repayments. The Company also had $52 million (2022 –
$53 million) of restricted cash related to the TEC Hedland
Pty Ltd bond. These cash reserves are required to be held
under commercial arrangements and for debt service,
which may be replaced by letters of credit in the future.
fund scheduled
to
F. Letters of Credit
Letters of credit issued by TransAlta are drawn on its $2.0
billion committed syndicated credit facility, its $240 million
bilateral committed credit facilities and its $400 million
uncommitted demand facilities. TransAlta has drawn $417
million on its committed syndicated credit facility, $178
million on its bilateral committed credit facilities and $187
million on its uncommitted demand facilities.
Letters of credit are issued to counterparties as required
by various contractual arrangements with the Company
and certain subsidiaries of the Company. If the Company or
its subsidiary does not perform under such contracts, the
counterparty may present its claim for payment to the
financial institution through which the letter of credit was
issued. All letters of credit expire within one year and are
expected to be renewed, as needed, in the normal course
of business. The total outstanding letters of credit as at
Dec. 31, 2023, was $782 million (2022 – $1,175 million)
with nil (2022 – nil) amounts exercised by third parties
under these arrangements.
F75
TransAlta Corporation 2023 Integrated Report
25. Exchangeable Securities
On March 22, 2019, the Company entered
into an
Investment Agreement whereby Brookfield Renewable
Partners or its affiliates (collectively "Brookfield") agreed to
invest $750 million in TransAlta through the purchase of
exchangeable securities, which are exchangeable into an
A. $750 Million Exchangeable Securities
equity ownership interest in TransAlta’s Alberta Hydro
Assets in the future at a value based on a multiple of the
Alberta Hydro Assets’ future-adjusted EBITDA ("Option
to Exchange").
As at
Exchangeable debentures – due May 1, 2039(1)
Exchangeable preferred shares(2)
Total exchangeable securities
Dec. 31, 2023
Dec. 31, 2022
Carrying
value
Face
value
Interest
Carrying
value
Face
value
344
350
400
744
400
750
7%
7%
339
400
350
400
739
750
Interest
7%
7%
(1) Seven per cent unsecured subordinated debentures due May 1, 2039.
(2) Redeemable, retractable first preferred shares (Series I). Exchangeable preferred share dividends are reported as interest expense.
On Dec. 11, 2023, the Company declared a dividend of $7
million, in aggregate, for the Exchangeable Preferred
Shares at the fixed rate of 1.764 per cent, per share,
payable on Feb. 28, 2024. The Exchangeable Preferred
Shares are considered debt for accounting purposes and,
as such, dividends are reported as interest expense (Note
10).
B. Option to Exchange
As at
Description
Option to exchange – embedded derivative
Dec. 31, 2023
Dec. 31, 2022
Base fair value
Sensitivity
Base fair value
Sensitivity
—
+nil
-25
—
+nil
-25
The Investment Agreement allows Brookfield the option to
exchange all of the outstanding exchangeable securities
after Dec. 31, 2024, into an equity ownership interest of up
to a maximum 49 per cent in an entity that has been
formed to hold TransAlta’s Alberta Hydro Assets. The fair
value of the option to exchange is considered a Level III
fair value measurement as there is no available market-
observable data. It is therefore valued using a mark-to-
forecast model with inputs that are based on historical
data and changes in underlying discount rates only when it
represents a long-term change in the value of the option
to exchange.
Sensitivity ranges for the base fair value are determined
using reasonably possible alternative assumptions for key
unobservable inputs, which is mainly the change in the
implied discount rate of the future cash flow. The
sensitivity analysis has been prepared using
the
Company’s assessment that a change in the implied
discount rate of the future cash flow of one per cent is a
reasonably possible change.
The maximum equity interest Brookfield can own with
respect to the Hydro Assets is 49 per cent. If Brookfield’s
ownership interest is less than 49 per cent at conversion,
Brookfield has a one-time option payable in cash to
increase its ownership to up to 49 per cent, exercisable up
until Dec. 31, 2028, provided Brookfield holds at least 8.5
per cent of TransAlta’s common shares. Under this top-up
option, Brookfield will be able to acquire an additional 10
per cent interest in the entity holding the Hydro Assets,
provided the 20-day volume-weighted average price
(“VWAP”) of TransAlta’s common shares is not less than
$14 per share prior to the exercise of the option and up to
the full 49 per cent if the 20-day VWAP of TransAlta’s
common shares at that time is not less than $17 per share.
To the extent the value of the investment would exceed a
49 per cent equity interest, Brookfield will be entitled to
receive the balance of the redemption price in cash.
In connection with the Investment Agreement, Brookfield is
entitled to nominate two directors for election to the Board.
TransAlta Corporation
2023 Integrated Report
F76
26. Defined Benefit Obligation and Other Long-Term Liabilities
The components of defined benefit obligation and other long-term liabilities are as follows:
As at Dec. 31
Defined benefit obligation (Note 31)
Retail power contract liability
Other
Total
2023
155
83
13
251
2022
150
126
18
294
The liability for pension and post-employment benefits and
associated costs included in compensation expenses are
impacted by estimates related to changes in key actuarial
assumptions, including discount rates. The defined benefit
obligation has increased by $5 million to $155 million as at
Dec. 31, 2023, from $150 million as at Dec. 31, 2022.
During 2023, the Company made a voluntary contribution
of $4 million (US$3 million) to improve the funded status of
the US Defined Benefit Pension Plan for the Centralia
thermal facility.
During 2022, the Company made a voluntary contribution
of $35 million to further improve the funded status of the
Sunhills Mining Ltd. Pension Plan for the Highvale mine and
to support the employees affected by the closure of the
Highvale mine in 2021 and our transition off-coal to cleaner
sources. The contribution reduces the amount of the
Company's future funding obligations, including amounts
secured by the letters of credit.
A one per cent increase in discount rates would result in a
$40 million decrease in the defined benefit obligation.
Refer to Note 31 for additional sensitivities impacting the
defined benefit obligation.
On Dec. 1, 2022, the Company closed a purchase and sale
agreement for customer retail contracts to deliver power
and gas, along with power and gas financial swaps. The
Company accounted for the purchase as an asset
acquisition and allocated values to risk management assets
of $139 million (Level II valuation) and retail power contract
liabilities of $129 million within the Gas segment. The retail
power contract liabilities acquired represent certain off-
market retail power customer contracts for which fair value
was determined as the present value of the amount by
which contract terms deviated from the terms that a
market participant could have achieved at the closing date.
The retail contract liability is amortized to depreciation over
the remaining term of the contracts based on volumes that
will be delivered each month.
F77
TransAlta Corporation 2023 Integrated Report
27. Common Shares
A. Issued and Outstanding
TransAlta is authorized to issue an unlimited number of voting common shares without nominal or par value.
As at Dec. 31
Issued and outstanding, beginning of period
Purchased and cancelled under the NCIB
Share-based payment plans
Stock options exercised
Issued for acquisition of TransAlta Renewables(1) (Note 4)
Issued and outstanding, end of year, prior to ASPP
2023
Common
shares
(millions)
Amount
2022
Common
shares
(millions)
Amount
268.1
2,863
271.0
2,901
(7.5)
(80)
(4.3)
(46)
0.8
0.7
46.5
6
5
510
0.9
0.5
—
5
3
—
308.6
3,304
268.1
2,863
Provision for repurchase of common shares under ASPP
(1.7)
(19)
—
—
Issued and outstanding, end of year
(1) Net of $4 million of transaction costs.
306.9
3,285
268.1
2,863
B. Normal Course Issuer Bid ("NCIB") Program
The effects of the Company's purchase and cancellation of common shares during the period are as follows:
For the year ended Dec. 31
Total shares purchased(1)
Average purchase price per share
Total cost (millions)
Book value of shares cancelled
Amount recorded in deficit
2023
2022
7,537,500
4,342,300
11.49
12.48
87
80
(7)
54
46
(8)
(1) At Dec. 31, 2023, includes 181,800 (2022 - 164,300) shares that were repurchased but were not cancelled due to timing differences between the
transaction date and settlement date. As a result, $2 million (2022 - $2 million) was paid subsequent to the year end.
2023
On May 26, 2023, the Toronto Stock Exchange (“TSX”)
accepted the notice filed by the Company to renew its
normal course issuer bid for a portion of its common
shares. Pursuant to the NCIB, TransAlta may repurchase up
to a maximum of 14 million common shares, representing
approximately 7.29 per cent of its public float of common
shares as at May 17, 2023. Any common shares purchased
under the NCIB are cancelled. The period during which
TransAlta is authorized to make purchases under the NCIB
commenced on May 31, 2023, and ends on May 30, 2024.
On Dec. 19, 2023, the Company entered into an Automatic
Share Purchase Plan
("ASPP") which permits an
independent broker to repurchase shares under the NCIB
during the first quarter blackout period through to the end
of the ASPP. The Company has recognized a provision of
$19 million for the repurchase of common shares under the
ASPP within accounts payables and accrued liabilities as at
Dec. 31, 2023, as a estimate of the maximum number of
shares
the
blackout period.
repurchased during
could be
that
Shares purchased by the Company under the NCIB are
recognized as a reduction to share capital equal to the
average carrying value of the common shares. Any
difference between the aggregate purchase price and the
average carrying value of the common shares is recorded
in deficit.
TransAlta Corporation
2023 Integrated Report
F78
2022
On May 24, 2022, the TSX accepted the notice filed by the
Company to renew its normal course issuer bid for a
portion of its common shares. Pursuant to the NCIB,
TransAlta may repurchase up to a maximum of 14 million
common shares, representing approximately 7.16 per cent
of its public float of common shares as at May 17, 2022.
C. Shareholder Rights Plan
The Company initially adopted the Shareholder Rights Plan
in 1992, which was amended and restated on April 28,
2022. As required, the Shareholder Rights Plan must be put
before the Company’s shareholders every three years for
approval. It was last approved on April 28, 2022, and will
need to be approved at the annual meeting of shareholders
D. Earnings per Share
Year ended Dec. 31
except
common
in 2025. The primary objective of the Shareholder Rights
Plan is to encourage a potential acquirer to meet certain
minimum standards designed to promote the fair and equal
treatment of all common shareholders. When an acquiring
shareholder acquires 20 per cent or more of the
Company’s
limited
shares,
circumstances including by way of a “permitted bid” or a
"competing permitted bid" (as defined in the Shareholder
Rights Plan), the rights granted under the Shareholder
Rights Plan become exercisable by all shareholders except
those held by the acquiring shareholder. Each right will
entitle a shareholder, other than the acquiring shareholder,
to purchase additional common shares at a significant
discount to market, thus exposing the person acquiring 20
per cent or more of the shares to substantial dilution of
their holdings.
in
Net earnings (loss) attributable to common shareholders
Basic and diluted weighted average number of common shares
outstanding (millions)
Net earnings (loss) per share attributable to common shareholders, basic
and diluted
E. Dividends
2023
644
2022
4
2021
(576)
276
271
271
2.33
0.01
(2.13)
On Nov. 21, 2023, the Company declared a quarterly dividend of $0.06 per common share, payable on April 1, 2024.
There have been no transactions involving common shares between the reporting date and the date of completion of
these Consolidated Financial Statements.
F79
TransAlta Corporation 2023 Integrated Report
28. Preferred Shares
A. Issued and Outstanding
All preferred shares issued and outstanding are non-voting cumulative redeemable fixed or floating rate first
preferred shares.
As at Dec. 31
Series(1)
Series A
Series B
Series C
Series D
Series E
Series G
Issued and outstanding, end of period
2023
2022
Number of
shares
(millions)
Number of
shares
(millions)
Amount
Amount
9.6
2.4
10.0
1.0
9.0
6.6
38.6
235
58
243
26
219
161
942
9.6
2.4
10.0
1.0
9.0
6.6
38.6
235
58
243
26
219
161
942
(1) The Series I Preferred Shares are accounted for as long-term debt. Refer to Note 25.
I. Series C Cumulative Redeemable Rate Reset
Preferred Shares Conversion
II. Series E Cumulative Fixed Redeemable Rate
Reset Preferred Shares Conversion
On June 30, 2022, the Company converted 1,044,299 of
its 11.0 million Cumulative Redeemable Rate Reset First
Preferred Shares, Series C (“Series C Shares”), on a one-
for-one basis, into Cumulative Redeemable Floating Rate
First Preferred Shares, Series D (“Series D Shares”).
The Series C Shares pay fixed cumulative preferential cash
dividends on a quarterly basis, for the five-year period
from and including June 30, 2022, to but excluding June
30, 2027, if, as and when declared by the Board. The
annual fixed dividend rate is 5.854 per cent, being equal to
the five-year Government of Canada bond yield of 2.754
per cent determined as of May 31, 2022, plus 3.10 per
cent, in accordance with the terms of the Series C Shares.
The Series D Shares pay quarterly floating rate cumulative
preferential cash dividends for the five-year period from
and including June 30, 2022, to but excluding June 30,
2027, if, as and when declared by the Board. The quarterly
dividend rate for the Series D Shares is established each
quarter, and is equal to the annual rate for the auction of
90-day Government of Canada Treasury Bills, plus 3.10 per
cent, in accordance with the terms of the Series D Shares.
On Sept. 21, 2022, the Company announced that, after
taking into account all election notices received for the
conversion of the Cumulative Redeemable Rate Reset
Preferred Shares, Series E (the "Series E shares") into
Cumulative Redeemable Floating Rate Preferred Shares
Series F (the "Series F Shares"), there were 89,945 Series
E Shares tendered for conversion, which was less than the
one million shares required to give effect to conversions
into Series F Shares. Therefore, none of the Series E
Shares were converted into Series F Shares.
As a result, the Series E Shares will be entitled to receive
quarterly fixed cumulative preferential cash dividends, if,
as and when declared by the Board. The annual dividend
rate for the Series E Shares for the five-year period from
and including Sept. 30, 2022, to but excluding Sept. 30,
2027, will be 6.894 per cent, which is equal to the five-
year Government of Canada bond yield of 3.244 per cent,
determined as of Aug. 31, 2022, plus 3.65 per cent, in
accordance with the terms of the Series E Shares.
TransAlta Corporation
2023 Integrated Report
F80
Preferred Share Series Information
The holders are entitled to receive cumulative fixed
quarterly cash dividends at specified rates, as approved by
the Board. After an initial period of approximately five years
from issuance and every five years thereafter (“Rate Reset
Date”), the fixed rate resets to the sum of the then five-
year Government of Canada bond yield (the fixed rate
“Benchmark”) plus a specified spread. Upon each Rate
Reset Date, the shares are also:
• Redeemable at the option of the Company, in whole or in
part, for $25.00 per share, plus all declared and unpaid
dividends at the time of redemption.
• Convertible at the holder’s option into a specified series
of non-voting cumulative redeemable floating rate first
preferred shares that pay cumulative floating rate
quarterly cash dividends, as approved by the Board,
based on the sum of the then Government of Canada 90-
day Treasury Bill rate (the floating rate “Benchmark”) plus
a specified spread. The cumulative floating rate first
preferred shares are also redeemable at the option of the
into each original
Company and convertible back
cumulative fixed rate first preferred share series, at each
subsequent Rate Reset Date, on the same terms as
noted above.
Characteristics specific to each first preferred share series as at Dec. 31, 2023, are as follows:
Series(1)
A
B
C
D
E
G
Rate during
term
Annual dividend
rate per share
($)(2)
Next conversion
date
Rate spread
over benchmark
(per cent)
Convertible
to Series
Fixed
Floating
Fixed
Floating
Fixed
Fixed
0.71924
March 31, 2026
1.718910
March 31, 2026
1.46352
June 30, 2027
1.98695
June 30, 2027
1.72352
Sept. 30, 2027
1.24700
Sept. 30, 2024
2.03
2.03
3.10
3.10
3.65
3.80
B
A
D
C
F
H
(1) The Series I Preferred Shares are accounted for as long-term debt. Refer to Note 25.
(2) The annual dividend rate per share represents dividends declared in 2023.
B. Dividends
The following table summarizes the preferred share dividends declared in 2023 and 2022:
Series
A
B(2)
C
D(3)
E
G
Total for the year
Total dividends declared
2023(1)
2022(1)
7
4
15
2
15
8
51
7
3
14
1
13
8
46
(1) No dividends were declared in the first quarter of the year as the quarterly dividend related to the period covering the first quarter was declared in
December of the prior year.
(2) Series B Preferred Shares pay quarterly dividends at a floating rate based on the 90-day Government of Canada Treasury Bill rate, plus 2.03 per cent.
(3) Series D Preferred Shares pay quarterly dividends at a floating rate based on the 90-day Government of Canada Treasury Bill rate, plus 3.10 per cent.
On Dec. 11, 2023, the Company declared a quarterly
dividend of $0.17981 per share on the Series A preferred
shares, $0.43958 per share on the Series B preferred
shares, $0.36588 per share on the Series C preferred
shares, $0.50609 per share on the Series D preferred
shares, $0.43088 per share on the Series E preferred
shares and $0.31175 per share on the Series G preferred
shares, payable on March 31, 2024.
F81
TransAlta Corporation 2023 Integrated Report
29. Accumulated Other Comprehensive Loss
The components of and changes in, accumulated other comprehensive loss are as follows:
Currency translation adjustment
Opening balance, Jan. 1
(Losses) gains on translating net assets of foreign operations, net of reclassifications to net
earnings, net of tax
Gains (losses) on financial instruments designated as hedges of foreign operations, net of
reclassifications to net earnings, net of tax(1)
Balance, Dec. 31
Cash flow hedges
Opening balance, Jan. 1
Gains (losses) on derivatives designated as cash flow hedges, net of reclassifications to
net earnings and to non-financial assets, net of tax(2)
Balance, Dec. 31
Employee future benefits
Opening balance, Jan. 1
Net actuarial gains on defined benefit plans, net of tax(3)
Balance, Dec. 31
Other
Opening balance, Jan. 1
Change in ownership of TransAlta Renewables
Intercompany and third-party investments at FVTOCI
Balance, Dec. 31
Accumulated other comprehensive loss
2023
2022
(39)
(6)
9
(36)
(35)
21
(25)
(39)
(228)
99
228
(456)
(129)
(228)
8
(5)
3
37
(64)
25
(2)
(29)
37
8
(18)
—
55
37
(164)
(222)
(1) Net of income tax expense of $1 million for the year ended Dec. 31, 2023 (Dec. 31, 2022 – $3 million recovery).
(2) Net of income tax expense of $27 million for the year ended Dec. 31, 2023 (Dec. 31, 2022 – $112 million recovery).
(3) Net of income tax recovery of $1 million for the year ended Dec. 31, 2023 (Dec. 31, 2022 – $12 million).
30. Share-Based Payment Plans
The Company has the following share-based payment plans:
A. Performance Share Unit (“PSU”) and
Restricted Share Unit (“RSU”) Plan
Under the Share Unit Plan, grants of PSUs and RSUs may
be made annually, but are measured and assessed over a
three-year performance period. Grants are determined as a
percentage of participants’ base pay and are converted to
PSUs or RSUs on the basis of the Company’s common
share price at the time of grant. Vesting of PSUs is subject
to achievement over a three-year period of specific
performance measures that are established at the time of
each grant. RSUs are subject to a three-year cliff-vesting
requirement. RSUs and PSUs track the Company’s share
price over the three-year period and accrue dividends as
additional units at the same rate as dividends paid on the
Company’s common shares.
The pre-tax compensation expense related to PSUs and
RSUs in 2023 was $21 million (2022 – $20 million, 2021 -
$14 million), which is included in OM&A in the Consolidated
Statements of Earnings (Loss).
TransAlta Corporation
2023 Integrated Report
F82
B. Deferred Share Unit (“DSU”) Plan
Under the Share Unit Plan, members of the Board and
executives may, at their option, purchase DSUs using
certain components of their fees or pay. A DSU is a
notional share that has the same value as one common
share of the Company and fluctuates based on the
changes in the value of the Company’s common shares in
the marketplace. DSUs accrue dividends as additional
DSUs at the same rate as dividends are paid on the
Company’s common shares. DSUs are redeemable in cash
and may not be redeemed until the termination or
retirement of the director or executive from the Company.
The Company accrues a liability and expense for the
appreciation in the common share value in excess of the
DSU’s purchase price and for dividend equivalents earned.
The pre-tax compensation expense related to the DSUs
was $1 million
(2022 - nil, 2021 – $3
million expense).
in 2023
C. Stock Option Plan
In 2023, the Company granted executive officers of the
Company a total of 0.4 million stock options with a
weighted average exercise price of $12.02 that vest over a
three-year period and expire seven years after issuance
(2022 – 0.3 million stock options at $12.66; 2021 - 0.7
million stock options at $9.86). The expense recognized
relating to these grants during 2023 was approximately $1
million
(2022 – approximately $1 million, 2021 –
approximately $2 million).
The total options outstanding and exercisable under the
Stock Option Plan at Dec. 31, 2023, are outlined below:
Options outstanding
Range of exercise prices(1)
($ per share)
5.00-12.00
Number of options
(millions)
Weighted average remaining
contractual life (years)
Weighted average exercise price
($ per share)
2.5
3.60
9.17
(1) Options currently exercisable as at Dec. 31, 2023.
31. Employee Future Benefits
A. Description
The Company sponsors registered pension plans
in
Canada and the US covering substantially all employees of
the Company in these countries and specific named
employees working
internationally. These plans have
defined benefit and defined contribution options and in
Canada there is an additional non-registered supplemental
plan for eligible employees whose annual earnings exceed
the Canadian income tax limit. Except for the Highvale
pension plan acquired in 2013, the Canadian and US
defined benefit pension plans are closed to new entrants.
The US defined benefit pension plan was frozen effective
Dec. 31, 2010, resulting in no future benefits being earned.
The supplemental pension plan was closed as of Dec. 31,
2015, and a new defined contribution supplemental
pension plan commenced for executive members effective
Jan. 1, 2016. Current executives as of Dec. 31, 2015, were
grandfathered into the old supplemental plan.
The latest actuarial valuation for accounting purposes of
the US pension plan was at Jan. 1, 2022. The latest
actuarial valuation for accounting purposes of the Highvale
and Canadian pension plans was at Dec. 31, 2021. The
measurement date used for all plans to determine the fair
value of plan assets and the present value of the defined
benefit obligation was Dec. 31, 2023.
F83
TransAlta Corporation 2023 Integrated Report
Funding of the registered pension plans complies with
applicable regulations that require actuarial valuations of
the pension funds at least once every three years in
Canada, or more, depending on funding status and every
year in the US. The supplemental pension plan is solely the
obligation of the Company. The Company is not obligated
to fund the supplemental plan but is obligated to pay
benefits under the terms of the plan as they come due.
The Company posted a letter of credit in March 2023 in
the amount of $88 million, and provided $70 million in
surety bonds, to secure the obligations under the
supplemental plan and the Canadian defined benefit
plan, respectively.
The Company provides other health and dental benefits to
the age of 65 for both disabled members and retired
members through its other post-employment benefits
latest actuarial valuations for accounting
plans. The
purposes of the Canadian and US plans were as at Dec. 31,
2021 and Jan. 1, 2022, respectively. The measurement
date used to determine the present value obligation for
both plans was Dec. 31, 2023.
The Company provides several defined contribution plans,
including an Australian superannuation plan and a US
401(k) savings plan, that provide for company contributions
from five per cent to eleven per cent, depending on the
plan. Optional employee contributions are allowed for all
the defined contribution plans.
B. Costs Recognized
The costs recognized in net earnings during the year on the defined benefit, defined contribution and other post-
employment benefits plans are as follows:
Year ended Dec. 31, 2023
Current service cost
Administration expenses
Interest cost on defined benefit obligation
Interest on plan assets
Defined benefit expense
Defined contribution expense
Net expense
Year ended Dec. 31, 2022
Current service cost
Administration expenses
Interest cost on defined benefit obligation
Interest on plan assets
Defined benefit expense
Defined contribution expense
Net expense
Year ended Dec. 31, 2021
Current service cost
Administration expenses
Interest cost on defined benefit obligation
Interest on plan assets
Curtailment and amendment gain
Defined benefit expense
Defined contribution expense
Net expense
Registered
Supplemental
Other
Total
1
1
16
(13)
5
11
16
1
—
4
(1)
4
—
4
—
—
1
—
1
—
1
2
1
21
(14)
10
11
21
Registered
Supplemental
Other
Total
1
1
13
(9)
6
11
17
1
—
3
—
4
—
4
—
—
—
—
—
—
—
2
1
16
(9)
10
11
21
Registered
Supplemental
Other
Total
3
1
12
(8)
(7)
1
8
9
2
—
2
—
—
4
—
4
1
—
—
—
—
1
—
1
6
1
14
(8)
(7)
6
8
14
TransAlta Corporation
2023 Integrated Report
F84
C. Status of Plans
The status of the defined benefit pension and other post-employment benefit plans is as follows:
Year ended Dec. 31, 2023
Fair value of plan assets
Present value of defined benefit obligation
Funded status – plan deficit
Amount recognized in the Consolidated Financial Statements:
Accrued current liabilities
Other long-term liabilities
Total amount recognized
Year ended Dec. 31, 2022
Fair value of plan assets
Present value of defined benefit obligation
Funded status – plan deficit
Amount recognized in the Consolidated Financial Statements:
Accrued current liabilities
Other long-term liabilities
Total amount recognized
Registered
Supplemental
Other
269
(340)
(71)
(1)
(70)
(71)
15
(89)
(74)
(5)
(69)
(74)
—
(17)
(17)
(1)
(16)
(17)
Registered
Supplemental
Other
274
(345)
(71)
(1)
(70)
(71)
15
(85)
(70)
(6)
(64)
(70)
—
(17)
(17)
(1)
(16)
(17)
Total
284
(446)
(162)
(7)
(155)
(162)
Total
289
(447)
(158)
(8)
(150)
(158)
F85
TransAlta Corporation 2023 Integrated Report
D. Plan Assets
The fair value of the plan assets of the defined benefit pension and other post-employment benefit plans is as follows:
Registered
Supplemental
Other
As at Dec. 31, 2021
Interest on plan assets
Net loss on plan assets
Contributions(1)
Benefits paid
Administration expenses
Change in foreign exchange rates
As at Dec. 31, 2022
Interest on plan assets
Net return on plan assets
Contributions(2)
Benefits paid
Administration expenses
Change in foreign exchange rates
As at Dec. 31, 2023
339
9
(55)
38
(57)
(1)
1
274
13
15
5
(36)
(1)
(1)
269
14
—
—
6
(5)
—
—
15
1
(1)
6
(6)
—
—
15
Total
353
9
(55)
44
(62)
(1)
1
289
14
14
13
—
—
—
—
—
—
—
—
—
—
2
(2)
(44)
—
—
—
(1)
(1)
284
(1) The Company made a voluntary contribution of $35 million to further improve the funded status of the Sunhills Mining Ltd. Pension Plan for the Highvale
mine. The contribution reduces the amount of the Company's future funding obligations, including amounts secured by the letters of credit.
(2) The Company made a voluntary contribution of $4 million to further improve the funded status of the US Defined Benefit Pension Plan for the Centralia
thermal facility.
TransAlta Corporation
2023 Integrated Report
F86
The fair value of the Company’s defined benefit plan assets by major category is as follows:
As at Dec. 31, 2023
Equity securities
Canadian
US
International
Private
Bonds
A - AAA
BBB
Below BBB
Loans(1)
Alternative funds(2)
Money market and cash and cash equivalents
Total
(1)
Includes A credit rating loans of $1 million.
(2) Alternative funds include investments in infrastructure and real estate funds.
Dec. 31, 2022(1)
Equity securities
Canadian
US
International
Private
Bonds
A - AAA
BBB
Below BBB
Loans(2)
Alternative funds(3)
Money market and cash and cash equivalents
Total
Level I
Level II
Level III
Total
—
—
—
—
—
1
—
—
—
2
3
12
6
86
—
30
5
—
2
—
19
—
—
—
1
62
10
4
—
44
—
12
6
86
1
92
16
4
2
44
21
160
121
284
Level I
Level II
Level III
Total
—
—
—
—
—
1
—
—
—
—
1
18
17
79
—
27
6
—
2
—
20
169
—
—
—
1
61
12
6
—
39
—
119
18
17
79
1
88
19
6
2
39
20
289
(1) The fair value level classifications of certain mutual fund investments has been revised for consistency with 2023 classifications.
(2)
Includes A credit rating loans of $1 million and BBB credit rating loans of $1 million.
(3) Alternative funds include investments in infrastructure and real estate funds.
Plan assets do not include any common shares of the Company at Dec. 31, 2023 and Dec. 31, 2022.
F87
TransAlta Corporation 2023 Integrated Report
E. Defined Benefit Obligation
The present value of the obligation for the defined benefit pension and other post-employment benefit plans is as follows:
Registered
Supplemental
Other
Present value of defined benefit obligation as at Dec. 31, 2021
Current service cost
Interest cost
Benefits paid
Actuarial gain arising from financial assumptions
Actuarial gain arising from experience adjustments
Change in foreign exchange rates
469
1
13
(57)
(83)
1
1
Present value of defined benefit obligation as at Dec. 31, 2022
345
Current service cost
Interest cost
Benefits paid
Actuarial loss arising from demographic assumptions
Actuarial loss arising from financial assumptions
Actuarial loss arising from experience adjustments
Change in foreign exchange rates
1
16
(36)
1
12
2
(1)
340
Present value of defined benefit obligation as at Dec. 31, 2023
(1) The weighted average duration of the defined benefit plan obligation as at Dec. 31, 2023, is 10.4 years.
F. Contributions
101
23
1
3
(5)
(22)
7
—
85
1
4
—
—
1
(5)
(2)
—
17
—
1
Total
593
2
16
(61)
(110)
6
1
447
2
21
(6)
(2)
(44)
—
4
1
—
89
—
1
—
—
17
1
17
3
(1)
446
The expected employer contributions for 2024 for the defined benefit pension and other post-employment benefit plans
are as follows:
Expected employer contributions
Registered
Supplemental
Other
3
5
1
Total
9
TransAlta Corporation
2023 Integrated Report
F88
G. Assumptions
The significant actuarial assumptions used in measuring the Company’s defined benefit obligation for the defined benefit
pension and other post-employment benefit plans are as follows:
As at Dec. 31 (per cent)
Registered
Supplemental Other
Registered
Supplemental Other
2023
2022
Accrued benefit obligation
Discount rate
Rate of compensation increase
Assumed health-care cost trend rate
Health-care cost escalation(1)(3)
Dental-care cost escalation
Benefit cost for the year
Discount rate
Rate of compensation increase
Assumed health-care cost trend rate
Health-care cost escalation(2)(4)
Dental-care cost escalation
4.6
2.9
—
—
5.0
2.7
—
—
4.6
3.0
—
—
5.0
3.0
—
—
4.7
—
6.8
4.2
5.0
—
7.1
4.7
4.7
2.6
—
—
2.8
2.9
—
—
5.0
5.0
3.0
—
—
—
7.1
4.2
2.8
3.0
2.7
—
—
—
6.8
4.7
(1) 2023 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2033 and remaining at that level thereafter for the US and decreasing gradually by
0.3 per cent per year to 4.5 per cent in 2030 for Canada.
(2) 2023 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2032 and remaining at that level thereafter for the US and decreasing gradually by
0.3 per cent per year to 4.5 per cent in 2030 for Canada.
(3) 2022 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2032 and remaining at that level thereafter for the US and decreasing gradually by
0.3 per cent per year to 4.5 per cent in 2030 for Canada.
(4) 2022 Post- and pre-65 rates: decreasing gradually to 4.5 per cent by 2031 and remaining at that level thereafter for the US and decreasing gradually by
0.3 per cent per year to 4.5 per cent in 2030 for Canada.
H. Sensitivity Analysis
The following table outlines the estimated increase in the net defined benefit obligation assuming certain changes in
key assumptions:
As at Dec. 31, 2023
1% decrease in the discount rate
1% increase in the salary scale
1% increase in the health-care cost trend rate
10% improvement in mortality rates
Canadian plans
US plans
Registered
Supplemental
Other
Pension
30
1
—
13
10
—
—
3
1
—
1
—
2
—
—
1
F89
TransAlta Corporation 2023 Integrated Report
32. Joint Arrangements
Joint arrangements at Dec. 31, 2023, included the following:
Joint operations
Segment
Sheerness
Gas
Goldfields Power
Fort Saskatchewan
Fortescue River Gas
Pipeline
Gas
Gas
Gas
McBride Lake
Wind and Solar
Soderglen
Pingston
Wind and Solar
Hydro
Joint venture
Segment
Skookumchuck
Wind and Solar
Tent Mountain
Hydro
Ownership
(per cent)
Description
50
50
60
43
50
50
50
Dual-fuel facility in Alberta, of which TA Cogen has a 50
per cent interest, operated by Heartland Generation Ltd.,
an affiliate of Energy Capital Partners
Gas-fired facility in Australia operated by TransAlta
Cogeneration facility in Alberta, of which TA Cogen has a
60 per cent interest, operated by TransAlta
Natural gas pipeline in Western Australia, operated by
DBP Development Group
Wind generation facility in Alberta operated by TransAlta
Wind generation facility in Alberta operated by TransAlta
Hydro facility in British Columbia operated by TransAlta
Ownership
(per cent)
Description
49
50
Wind generation facility in Washington operated by
Southern Power
Pumped hydro energy storage development project in
Alberta
33. Cash Flow Information
A. Change in Non-Cash Operating Working Capital
Year ended Dec. 31
(Use) source:
Accounts receivable
Prepaid expenses
Income taxes receivable
Inventory
Accounts payable, accrued liabilities and provisions
Income taxes payable
Change in non-cash operating working capital
2023
2022
2021
715
—
27
(2)
(550)
(66)
124
(869)
(28)
—
(61)
6
548
60
(316)
9
—
42
153
(2)
174
TransAlta Corporation
2023 Integrated Report
F90
B. Changes in Liabilities from Financing Activities
Balance
Dec. 31,
2022
3,669
739
68
4,476
Cash
issuances
39
—
—
39
Repayments
and dividends
paid(1)
(220)
—
(109)
New
leases
Dividends
declared
Foreign
exchange
impact
Other
Balance
Dec. 31,
2023
5
—
—
—
(36)
12
3,469
—
116
—
—
5
(26)
744
49
(329)
5
116
(36)
(9)
4,262
Long-term debt and
lease liabilities(2)
Exchangeable securities
Dividends payable
(common and preferred)(3)
Total liabilities from
financing activities
(1)
Includes a decrease of $164 million related to the repayment of long-term debt, a $46 million net decrease in borrowings under credit facilities and a
decrease in finance lease obligations of $10 million.
(2)
Includes bank overdraft of $3 million.
(3) Other dividends payable related to payment of TransAlta Renewables' non-controlling interest dividend reflected within distributions paid to subsidiaries
of non-controlling interests in the Consolidated Statements of Cash Flows.
Balance
Dec. 31,
2021
Cash
issuances(1)
Repayments
and dividends
paid(2)
New
leases
Dividends
declared
Foreign
exchange
impact Other
Balance
Dec. 31,
2022
3,267
981
(630)
40
—
39
(28)
3,669
735
62
—
—
— —
(97) —
—
103
—
4
— —
739
68
4,064
981
(727)
40
103
39
(24)
4,476
Long-term debt and
lease liabilities(3)
Exchangeable securities
Dividends payable
(common and preferred)
Total liabilities from
financing activities
(1)
Includes $449 million net increase in borrowings under credit facilities and an increase in issuance of long-term debt of $532 million.
(2)
Includes a decrease of $621 million related to the repayment of long-term debt and a decrease in finance lease obligations of $9 million.
(3)
Includes bank overdraft of $16 million.
F91
TransAlta Corporation 2023 Integrated Report
34. Capital
TransAlta’s capital is comprised of the following:
As at Dec. 31
Long-term debt(1)
Exchangeable securities
Bank overdraft
Equity
Common shares
Preferred shares
Contributed surplus
Deficit
Accumulated other comprehensive income (loss)
Non-controlling interests
Less: available cash and cash equivalents(2)
Less: principal portion of restricted cash on TransAlta OCP bonds(3)
Less: fair value liability (asset) of hedging instruments on long-term debt(4)
Total capital
2023
3,466
744
3
3,285
942
41
(2,567)
(164)
127
(348)
(17)
5
5,517
2022
3,653
739
16
2,863
942
41
(2,514)
(222)
879
(1,134)
(17)
(3)
5,243
Increase/
(decrease)
(187)
5
(13)
422
—
—
(53)
58
(752)
786
—
8
274
(1)
Includes lease liabilities, amounts outstanding under credit facilities, tax equity liabilities and current portion of long-term debt.
(2) The Company includes available cash and cash equivalents, as a reduction in the calculation of capital, as capital is managed using a net debt
position. These funds may be available and used to facilitate repayment of debt.
(3) The Company includes the principal portion of restricted cash on TransAlta OCP bonds as this cash is restricted specifically to repay outstanding debt.
(4) The Company includes the fair value of economic and designated hedging instruments on debt in an asset, or liability, position as a reduction, or
increase, in the calculation of capital, as the carrying value of the related debt has either increased, or decreased, due to changes in foreign
exchange rates.
The Company’s overall capital management strategy and its objectives in managing capital are as follows:
A. Maintain a Strong Financial Position
in
operates
The Company
and
capital-intensive commodity business and it is therefore a
priority to maintain a strong financial position that enables
the Company to access capital markets at reasonable
interest rates.
long-cycle
a
Maintaining a strong balance sheet also allows our
commercial team to contract the Company’s portfolio with
a variety of counterparties on terms and prices that are
favourable to the Company’s financial results and provides
the Company with better access to capital markets through
commodity and credit cycles. The Company has an
investment grade credit rating from Morningstar DBRS
(stable outlook).
the
In 2023, Moody's
Company's long term rating of Ba1 with a stable outlook.
Morningstar DBRS reaffirmed the Company's issuer rating
and unsecured debt/medium-term notes rating of BBB
(low) and the Company's preferred shares rating of Pfd-3
(low), all with stable outlook, and S&P Global Ratings
reaffirmed
reaffirmed the Company's senior unsecured debt rating
and issuer credit rating of BB+ with stable outlook. The
Company remains focused on maintaining a strong
financial position and cash flow coverage ratios. Credit
ratings provide information relating to the Company's
financing costs, liquidity and operations and affect the
Company's ability to obtain short-term and long-term
financing and/or the cost of such financing.
Management routinely monitors forecasted net earnings,
cash flows, capital expenditures and scheduled repayment
of debt with a goal of meeting the above ratio targets and
to meet dividend and PP&E expenditure requirements.
TransAlta Corporation
2023 Integrated Report
F92
B. Liquidity
For the years ended Dec. 31, 2023 and 2022, cash inflows
and outflows are summarized below. The Company
manages variations in working capital using existing
liquidity under credit facilities to ensure sufficient cash and
credit are available to fund operations, pay dividends,
to subsidiaries' non-controlling
distribute payments
interests and invest in PP&E.
Year ended Dec. 31
Cash flow from operating activities
Change in non-cash working capital
Cash flow from operations before changes in working capital
Dividends paid on common shares
Dividends paid on preferred shares
Distributions paid to subsidiaries’ non-controlling interests
Property, plant and equipment expenditures
Inflow (outflow)
2023
1,464
(124)
1,340
(58)
(51)
(223)
(875)
133
2022
877
316
1,193
(54)
(43)
(187)
(918)
(9)
Increase
(decrease)
587
(440)
147
(4)
(8)
(36)
43
142
TransAlta maintains sufficient cash balances and
committed credit facilities to fund periodic net cash
outflows related to its business. At Dec. 31, 2023, $1.4
billion (2022 – $1.0 billion) of the Company’s credit facilities
were fully available.
From time to time, TransAlta accesses capital markets, as
required, to help fund some of these periodic net cash
outflows to maintain its available liquidity and maintain its
capital structure and credit metrics within targeted ranges.
35. Related-Party Transactions
Details of the Company’s principal operating subsidiaries at Dec. 31, 2023, are as follows:
Subsidiary
TransAlta Generation Partnership
TransAlta Cogeneration, L.P.
Country
Canada
Canada
TransAlta Centralia Generation, LLC
US
TransAlta Energy Marketing Corp.
Canada
TransAlta Energy Marketing (U.S.), Inc.
US
TransAlta Energy (Australia), Pty Ltd.
TransAlta Renewables Inc.
Associate or joint venture
SP Skookumchuck Investment, LLC
Australia
Canada
Country
US
Ownership
(per cent)
Principal activity
100
Generation and sale of electricity
50.01
Generation and sale of electricity
100
100
100
100
100(1)
Generation and sale of electricity
Energy marketing
Energy marketing
Generation and sale of electricity
Generation and sale of electricity
Ownership
(per cent)
Principal activity
49
Generation and sale of electricity
(1) On Oct. 5, 2023, the Company acquired all of the outstanding common shares of TransAlta Renewables not already owned, directly or indirectly, by
TransAlta and certain of its affiliates. TransAlta Renewables at Dec. 31, 2023, is a wholly owned subsidiary of the Company (2022 – 60.1 per cent). Refer
to Note 4 for more details.
Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed.
Associates and joint ventures have been equity accounted for by the Company.
F93
TransAlta Corporation 2023 Integrated Report
A. Transactions with Key Management Personnel
TransAlta’s key management personnel include the President and Chief Executive Officer ("CEO"), members of the senior
management team that report directly to the President and CEO and the members of the Board. Key management
personnel compensation is as follows:
Year ended Dec. 31
Total compensation
Comprised of:
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
B. Transactions with Associates
2023
2022
21
23
2021
30
11
1
1
8
11
1
—
11
14
1
—
15
In connection with the exchangeable securities issued to
Brookfield, the Investment Agreement entitles Brookfield to
nominate two directors to the TransAlta Board. This allows
Brookfield to participate in the financial and operating
policy decisions of the Company, and as such, they are
considered associates of the Company.
In addition to the exchangeable securities disclosed in
Note 25, the Company may, in the normal course of
operations, enter into transactions on market terms with
associates that have been measured at exchange value
and recognized in the Consolidated Financial Statements,
including power purchase and sale agreements, derivative
contracts and asset management fees. Transactions and
balances between the Company and associates do
not eliminate.
Transactions with Brookfield include the following:
Year ended Dec. 31
Power sales
Purchased power
Asset management fees paid
2023
135
2
1
2022
127
12
2
2021
27
3
2
TransAlta Corporation
2023 Integrated Report
F94
36. Commitments and Contingencies
In addition to the commitments disclosed elsewhere in the financial statements, the Company has incurred the following
contractual commitments, either directly or through its interests in joint operations and joint ventures.
Approximate future payments under these agreements are as follows:
2024
2025
2026
2027
2028
2029 and
thereafter
55
49
50
48
57
436
9
86
60
3
47
9
71
57
3
—
6
—
42
2
—
260
189
100
4
—
44
2
—
98
5
—
37
2
—
93
—
184
25
—
101
738
1,486
Total
695
126
157
424
37
47
Natural gas, transportation and
other contracts
Transmission
Coal supply agreements
Long-term service agreements
Operating leases
Growth
Total
Commitments
Long-Term Service Agreements
in place,
TransAlta has various service agreements
primarily for inspections, repairs and maintenance that may
be required on natural gas facilities, equipment for gas and
turbines at various wind facilities.
Operating Leases
leases
include
Operating
lease commitments not
recognized under IFRS 16 and lease commitments that
have not yet commenced, mainly related to buildings,
vehicles and land.
Growth
Commitments for growth include the following projects:
Horizon Hill wind project, White Rock wind projects, the
Australian capacity and transmission expansions, the
Mount Keith
132kV expansion and various other
growth projects.
Natural Gas, Transportation and
Other Contracts
The Company has fixed price or volume natural gas
purchase and transportation contracts. Included in these
contracts are
transportation
15-year natural gas
agreements for a total of up to 400 terajoules ("TJ") per
day on a firm basis, ending in 2036 to 2038 and eight-year
natural gas transportation agreements for 75 TJ per day
related to the Sheerness facility ending in 2030 to 2031.
Transmission
The Company has several agreements to purchase
transmission network capacity in the Pacific Northwest.
Provided certain conditions for delivering the service are
met, the Company is committed to the transmission at the
supplier’s tariff rate whether it is awarded immediately or
delivered
in the future after additional facilities are
constructed.
Coal Supply Agreements
Various coal supply and associated rail transport contracts
are in place to provide coal for use in production at the
Centralia thermal facility. The coal supply agreements allow
TransAlta to take delivery of coal at fixed volumes with
dates extending to 2025.
F95
TransAlta Corporation 2023 Integrated Report
Contingencies
TransAlta is occasionally named as a party in various
claims and legal and regulatory proceedings that arise
during the normal course of its business. TransAlta reviews
each of these claims, including the nature of the claim, the
amount in dispute or claimed and the availability of
insurance coverage. There can be no assurance that any
particular claim will be resolved in the Company’s favour or
that such claims may not have a material adverse effect on
TransAlta. Inquiries from regulatory bodies may also arise
in the normal course of business, to which the Company
responds as required.
The Company conducts internal reviews of its offers and
offer behaviour in both the energy and ancillary services
markets in Alberta on an ongoing basis and will self-report
suspected contraventions or respond to inquiries from
regulatory agencies as required. There currently is no
certainty that any particular matter will be resolved in the
Company’s favour or that such matters may not have a
material adverse effect on TransAlta.
Brazeau Facility - Well License Applications to
Consider Hydraulic Fracturing Activities
The Alberta Energy Regulator ("AER") issued a subsurface
order on May 27, 2019, which does not permit any
hydraulic fracturing within three kilometres of the Brazeau
facility but permits hydraulic fracturing in all formations
(except the Duvernay) within three to five kilometres of the
Brazeau facility. Subsequently, two oil and gas operators
submitted applications to the AER for 10 well licences
(which include hydraulic fracturing activities) within three
to five kilometres of the Brazeau facility.
The Company's position, based on independent expert
analysis commissioned by the Government of Alberta, is
that hydraulic fracturing activities within five kilometres of
the Brazeau facility pose an unacceptable risk and that the
applications should be denied. The regulatory hearing to
consider these applications - Proceeding 379 - was
adjourned to April 2025. The other parties to the hearing,
including the Company, have supported the adjournment.
Brazeau Facility - Claim against the
Government of Alberta
On Sept. 9, 2022, the Company filed a Statement of Claim
against the Alberta Government in the Alberta Court of
King’s Bench seeking a declaration that: (a) granting
mineral leases within five kilometres of the Brazeau facility
is a breach of the 1960 agreement between the Company
the Alberta
and
Government is required to indemnify the Company for any
costs or damages that result from the risks of hydraulic
fracturing near the Brazeau facility. On Sept. 29, 2022, the
Alberta Government filed its Statement of Defence, which
asserts, among other things, that the Company: (a) is trying
the Alberta Government; and
(b)
to usurp the jurisdiction of the AER; and (b) is out of time
under the Limitations Act (Alberta). The trial was scheduled
for two weeks starting Feb. 26, 2024. The parties to the
matter, along with Cenovus Energy
Inc., sought an
adjournment when AER Proceeding 379 was adjourned.
The trial is scheduled to resume in February 2025 in the
event the parties are unable to resolve the dispute prior to
such date.
Garden Plain
Garden Plain I LP, a wholly owned subsidiary of the
Company, retained a third-party contractor to construct
the Garden Plain wind project near Hanna, Alberta. The
contractor experienced scheduling delays, challenges with
construction and significant cost overruns, resulting in
overdue deadlines, and has asserted a claim for $49 million
in damages. The Company disputes this claim in its entirety
and asserts a counterclaim. The parties have initiated the
dispute resolution procedure, and the arbitration hearing is
set down for three weeks starting April 14, 2025.
Hydro Power Purchase Arrangement ("Hydro
PPA") Emissions Performance Credits
into
the Carbon Competitiveness
The Balancing Pool claimed entitlement to 1,750,000
Emission Performance Credits ("EPCs") earned by the
Alberta Hydro facilities as a result of TransAlta opting those
Incentive
facilities
Regulation and Technology
Innovation and Emissions
Reduction Regulation from 2018-2020 inclusive. The EPCs
under dispute had no recorded book value as they were
internally generated. The Balancing Pool claimed
ownership of the EPCs because it believed the change-in-
law provisions under the Hydro PPA required the EPCs to
be passed through to the Balancing Pool. TransAlta
disputed
reached a
this claim. The parties have
confidential settlement and this matter is now resolved.
Sundance A Decommissioning
TransAlta filed an application with the Alberta Utilities
Commission seeking payment from the Balancing Pool for
TransAlta’s decommissioning costs
for Sundance A,
including its proportionate share of the Highvale mine. The
Balancing Pool and Utilities Consumer Advocate are
participating as interveners because they take issue with
the decommissioning costs claimed by TransAlta. The
application is being heard in the first quarter of 2024 with a
decision expected to be rendered in the third quarter
of 2024.
TransAlta Corporation
2023 Integrated Report
F96
For internal reporting purpose, the earnings information
from the Company's investment in Skookumchuck has
been presented in the Wind and Solar segment on a
proportionate basis. Information on a proportionate basis
reflects
the Company's share of Skookumchuck's
statement of earnings on a line-by-line basis. Proportionate
financial information is not and is not intended to be,
presented in accordance with IFRS. Under IFRS, the
investment in Skookumchuck has been accounted for as a
joint venture using the equity method.
37. Segment Disclosures
A. Description of Reportable Segments
The Company has six reportable segments as described
in Note 1.
The following tables provides each segment's results in the
format that the TransAlta’s President and Chief Executive
Officer (the chief operating decision maker) ("CODM"),
reviews the Company's segments to make operating
decisions and assess performance. The CODM assesses
the performance of the operating segments based on a
measure of adjusted EBITDA. This measurement basis
represents earnings before income taxes, adjusted for the
effects of: depreciation of property, plant and equipment
and amortization of intangibles, depreciation of right‐of‐use
assets, finance lease income, unrealized mark-to-market
gains or losses, gains and losses related to closed
positions effectively settled by offsetting positions with
exchanges recorded in the year the positions are settled,
unrealized foreign exchange gains or losses on commodity
transactions, depreciation on our mining equipment
included in fuel and purchased power, interest income
recorded on the prepaid funds, items within the Energy
Transition segment that may not be reflective of on-going
operations including certain costs related to decisions
made to accelerate our transition off-coal in Alberta and
our planned transition off-coal for Centralia, impairment
charges, share of (profit) loss of joint venture and other
costs or income adjustments. The tables below show the
reconciliation of the total segmented results and adjusted
EBITDA to the statement of earnings (loss) reported
under IFRS.
F97
TransAlta Corporation 2023 Integrated Report
B. Reported Adjusted Segment Earnings and Segment Assets
I. Reconciliation of Adjusted EBITDA to Earnings (Loss) before Income Tax
Year ended Dec. 31, 2023
Revenues
Reclassifications and adjustments:
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
533
357
1,514
751
220
1
3,376
(21)
—
3,355
(5)
—
—
—
—
746
557
—
557
—
189
64
3
—
—
—
23
(91)
—
—
—
152
—
—
—
—
—
—
—
—
—
(37)
(81)
55
12
1
1
1
3,326
1,060
—
(4)
1
1,056
—
112
152
—
2,158
43
—
—
—
—
115
542
1
—
—
—
30
(47)
1
(46)
—
—
—
—
—
(21)
—
—
—
—
(21)
(3)
(1)
—
—
—
37
81
(55)
(12)
(1)
50
—
4
4
—
46
—
—
—
(1)
(1)
459
257
801
122
109
(116)
1,632
Unrealized mark-to-market (gain) loss
(4)
16
(67)
Realized gain (loss) on closed
exchange positions
Decrease in finance lease receivable
Finance lease income
Unrealized foreign exchange loss on
commodity
Adjusted revenues
Fuel and purchased power
Reclassifications and adjustments:
—
—
10
—
—
—
—
—
—
55
12
1
529
373
1,525
19
30
453
Australian interest income
—
—
(4)
Adjusted fuel and purchased power
19
30
449
—
—
112
510
343
964
48
80
192
3
12
11
—
(7)
(40)
—
—
1
—
(6)
(40)
Carbon compliance
Gross margin
OM&A
Taxes, other than income taxes
Net other operating income
Reclassifications and adjustments:
Insurance recovery
Adjusted net other operating income
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and amortization
Asset impairment reversals
Interest income
Interest expense
Foreign exchange loss
Gain on sale of assets and other
Earnings before income taxes
—
—
—
—
—
3,355
1,060
—
1,060
112
2,183
539
29
(47)
—
(47)
4
12
(621)
48
59
(281)
(7)
4
880
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS.
TransAlta Corporation
2023 Integrated Report
F98
Year ended Dec. 31, 2022
Revenues
Reclassifications and adjustments:
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
606
303
1,209
714
160
(2)
2,990
(14)
—
2,976
Unrealized mark-to-market loss
1
104
251
Realized gain (loss) on closed
exchange positions
—
—
(4)
Decrease in finance lease receivable
—
—
46
Finance lease income
—
—
19
Unrealized foreign exchange gain
on commodity
—
—
—
Adjusted revenues
607
407
1,521
Fuel and purchased power
22
31
641
Reclassifications and adjustments:
Australian interest income
—
—
(4)
Adjusted fuel and purchased power
Carbon compliance
Gross margin
OM&A
22
—
31
637
1
83
585
375
801
55
68
195
Taxes, other than income taxes
3
12
15
Net other operating income
—
(23)
(38)
Reclassifications and adjustments:
Insurance recovery
—
7
—
—
(16)
(38)
10
—
—
—
—
724
566
—
566
(1)
159
69
4
—
—
—
12
47
—
—
(1)
218
—
—
—
—
218
35
—
—
—
—
—
378
—
43
—
—
—
46
19
(1)
(2)
3,475
3
1,263
—
(4)
3
1,259
(5)
78
—
—
—
—
—
(14)
—
—
—
—
(378)
(43)
(46)
(19)
1
—
—
—
—
—
(485)
2,976
—
1,263
4
4
—
—
1,263
78
—
2,138
(14)
(489)
1,635
101
523
1
—
—
—
35
(61)
7
(54)
(2)
(2)
3
—
3
—
—
—
(7)
(7)
527
311
629
86
183
(102)
1,634
Adjusted net other operating
income
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and amortization
Asset impairment charges
Interest income
Interest expense
Foreign exchange gain
Gain on sale of assets and other
Earnings before income taxes
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS.
F99
TransAlta Corporation 2023 Integrated Report
521
33
(58)
—
(58)
9
19
(599)
(9)
24
(286)
4
52
353
Hydro
Wind &
Solar(1)
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
Equity-
accounted
investments(1)
Reclass
adjustments
IFRS
financials
383
323
1,109
709
211
4
2,739
(18)
—
2,721
Year ended Dec. 31, 2021
Revenues
Reclassifications and adjustments:
Unrealized mark-to-market
(gain) loss
Realized gain (loss) on closed
exchange positions
Decrease in finance lease
receivable
—
25
(40)
—
—
(6)
—
—
41
Finance lease income
—
—
25
Unrealized foreign exchange
gain on commodity
—
—
(3)
Adjusted revenues
383
348
1,126
Fuel and purchased power
16
17
457
Reclassifications and adjustments:
Australian interest income
—
—
(4)
Mine depreciation
—
—
(79)
Coal inventory writedown
—
—
—
Adjusted fuel and purchased power
16
17
374
Carbon compliance
Gross margin
OM&A
Reclassifications and adjustments:
—
—
118
367
331
634
42
59
175
19
—
—
—
—
728
560
—
(111)
(17)
432
60
236
117
Parts and materials writedown
—
—
(2)
(26)
Curtailment gain
Adjusted OM&A
—
—
—
42
59
173
Taxes, other than income taxes
3
10
13
Net other operating loss (income)
—
—
(40)
6
97
6
48
(38)
—
(34)
29
—
23
—
—
—
202
—
—
—
—
—
—
202
36
—
—
36
—
—
—
—
—
41
—
—
25
(3)
4
4
2,791
1,054
—
(4)
—
(190)
—
(17)
4
843
—
178
—
1,770
84
513
—
—
(28)
6
84
491
1
33
—
8
—
(48)
—
(40)
—
—
—
—
—
(18)
—
—
—
—
—
—
(18)
(2)
—
—
(2)
(1)
—
—
—
—
—
—
(48)
—
—
(40)
—
322
262
488
133
166
(85)
1,286
34
(23)
(41)
(25)
3
—
—
—
—
—
(52)
2,721
—
1,054
4
190
17
211
—
—
—
—
1,054
178
(263)
1,489
—
511
28
(6)
22
—
—
48
48
—
—
511
32
8
—
8
9
25
(529)
(648)
11
(256)
16
54
(380)
Reclassifications and adjustments:
Royalty onerous contract and
contract termination penalties
Adjusted net other operating
loss (income)
Adjusted EBITDA(2)
Equity income
Finance lease income
Depreciation and amortization
Asset impairment charges
Interest income
Interest expense
Foreign exchange gain
Gain on sale of assets and other
Loss before income taxes
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment.
(2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS.
TransAlta Corporation
2023 Integrated Report
F100
II. Selected Consolidated Statements of Financial Position Information
As at As at Dec. 31, 2023
PP&E
Right-of-use assets
Intangible assets
Goodwill
Hydro
462
7
2
258
Wind and
Solar
Gas
Energy
Transition
Energy
Marketing
3,360
1,543
251
94
141
176
5
40
—
—
4
—
—
—
5
30
Corporate
Total
98
5,714
11
31
—
117
223
464
As at As at Dec. 31, 2022
Hydro
Wind and
Solar
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
PP&E
Right-of-use assets
Intangible assets
Goodwill
437
2,837 1,858
313
6
2
98
6
157
49
258
176
—
2
5
—
—
—
8
30
111 5,556
14
31
126
252
—
464
III. Selected Consolidated Statements of Cash Flows Information
Additions to non-current assets are as follows:
Year ended Dec. 31, 2023
Hydro
Additions to non-current assets:
Wind and
Solar
PP&E
Intangible assets
42
—
674
—
Gas
89
—
Energy
Transition
Energy
Marketing
Corporate
Total
16
—
—
—
54
13
875
13
Year ended Dec. 31, 2022
Hydro
Additions to non-current assets:
Wind and
Solar
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
PP&E
Intangible assets
36
—
745
43
19
—
19
—
—
3
75
918
9
31
Year ended Dec. 31, 2021
Hydro
Additions to non-current assets:
Wind and
Solar
Gas
Energy
Transition
Energy
Marketing
Corporate
Total
PP&E
Intangible assets
29
—
166
167
—
—
90
1
—
—
28
480
8
9
F101
TransAlta Corporation 2023 Integrated Report
IV. Depreciation and Amortization on the Consolidated Statements of Cash Flows
The reconciliation between depreciation and amortization reported on the Consolidated Statements of Earnings (Loss)
and the Consolidated Statements of Cash Flows is presented below:
Year ended Dec. 31
Depreciation and amortization expense on the Consolidated Statements of
Earnings (Loss)
Depreciation included in fuel and purchased power (Note 6)
Depreciation and amortization on the Consolidated Statements of Cash Flows
2023
621
—
621
2022
599
—
599
2021
529
190
719
C. Geographic Information
I. Revenues
Year ended Dec. 31
Canada
US
Australia
Total revenue
II. Non-Current Assets
As at Dec. 31
Canada
US
Australia
Total
D. Significant Customer
2023
2022
2021
2,218
987
150
3,355
1,905
1,854
940
131
731
136
2,976
2,721
Property, plant and
equipment
Right-of-use
assets
Intangible assets
Other assets
2023
3,578
1,749
387
5,714
2022
3,817
1,307
432
5,556
2023
2022
2023
2022
2023
2022
43
71
3
117
49
74
3
126
108
123
88
27
101
28
68
42
69
62
34
64
223
252
179
160
For the year ended Dec. 31, 2023, sales to the AESO represented 46 per cent of the Company’s total revenue (2022 –
sales to the AESO represented 60 per cent of the Company’s total revenue). There were no other companies that
accounted for more than 10 per cent of the Company's total revenue.
TransAlta Corporation
2023 Integrated Report
F102
Eleven-Year Financial and Statistical Summary
(in millions of Canadian dollars, except where noted)
Year ended Dec. 31
Financial Summary
STATEMENT OF EARNINGS
Revenues
Operating income (loss)
Earnings (loss) before income taxes
Net earnings (loss) attributable to common shareholders
STATEMENT OF FINANCIAL POSITION
Total assets
Current portion of long-term debt, net of cash and cash equivalents
Credit facilities, long-term debt and finance lease obligations
Exchangeable securities
Non-controlling interests
Preferred shares
Equity attributable to common shareholders(1)
Principal portion of restricted cash on TransAlta OCP and fair value (asset)
liability of hedging instruments on debt(1)
Total capital(2)
CASH FLOWS
Cash flow from operating activities
Cash flow from (used in) investing activities
COMMON SHARE INFORMATION (per share)
Net earnings (loss)
Comparable earnings(1)
Dividends declared on common share
Book value per common share (at year-end)(1)
Market price:
High
Low
Close (Toronto Stock Exchange at Dec. 31)
RATIOS (percentage except where noted)
Adjusted net debt to adjusted EBITDA(1,3,4) (times)
Return on equity attributable to common shareholders(1)
Comparable return on equity attributable to common shareholders(1)
Return on capital employed(1)
Comparable return on capital employed(1)
Earnings coverage (times)(1)
Dividend payout ratio based on FFO(1,4)
Adjusted EBITDA(1,3,4) (in millions of Canadian dollars)
Dividend coverage(1,4) (times)
Dividend yield(1)
Weighted average common shares for the year (in millions)
Common shares outstanding at Dec. 31 (in millions)
STATISTICAL SUMMARY
Number of employees
GROSS INSTALLED CAPACITY (MW)(5)
Energy Transition(7)
Gas(6,8)
Renewables (wind, solar and hydro)
Equity investments
Total generating capacity
Total generation production (GWh)
2023
2022
2021
3,355
1,089
880
644
8,659
184
2,934
744
127
942
595
(12)
5,517
1,464
(814)
2.33
n/a
0.22
2.16
13.97
10.02
11.02
2.5
84.8
n/a
17.6
n/a
4.3
4.4
1,632
24.6
2.0
276
307
1,257
671
3,084
3,006
67
6,828
22,029
2,976
531
353
4
10,741
(940)
3,475
739
879
942
168
(20)
5,243
877
(741)
0.01
n/a
0.21
0.62
15.28
10.52
12.11
2.2
1.0
n/a
9.2
n/a
2.2
4.1
1,634
18.3
1.7
271
268
2,721
(239)
(380)
(576)
9,226
(103)
2,423
735
1,011
942
640
(19)
5,629
1,001
(472)
(2.13)
n/a
0.19
2.37
14.61
9.57
14.05
2.2
(116.6)
n/a
(4.5)
n/a
(1.0)
5.1
1,286
23.0
1.3
271
271
1,282
1,282
671
3,084
2,828
67
6,650
21,258
1,472
3,084
2,694
67
7,387
22,105
Financial data presented is based on IFRS. Prior year figures that appear within the MD&A have been restated to conform with the current year’s
presentation. All other prior year figures have not been restated.
(1)
These items are not defined and have no standardized meaning under IFRS. Periods for which the non-IFRS measure was not previously disclosed
have not been calculated. After 2016, comparable earnings measures are no longer being calculated or reported on.
248
TransAlta Corporation 2023 Integrated Report
2020
2019
2018
2017
2016
2015
2014
2013
2,101
(99)
(303)
(336)
9,747
(598)
3,256
730
1,084
942
1,410
(13)
6,811
702
(687)
(1.22)
n/a
0.22
5.13
11.23
5.32
9.67
4.0
(30.3)
n/a
(1.5)
n/a
(0.5)
7.0
917
15.6
1.7
275
270
1,476
2,548
3,082
2,498
67
8,265
24,980
2,347
335
193
52
9,508
102
2,699
326
1,101
942
2,019
(17)
7,172
849
(512)
0.18
n/a
0.12
7.14
10.14
5.50
9.28
3.9
3.3
n/a
4.1
n/a
1.5
6.6
984
18.6
1.7
283
277
1,543
2,915
3,049
2,421
—
8,385
29,071
2,249
160
(96)
(248)
9,428
59
3,119
—
1,137
942
2,055
(10)
7,275
820
(394)
(0.86)
n/a
0.20
7.16
7.90
5.44
5.59
3.6
(15.8)
n/a
0.7
n/a
0.2
6.1
1,123
18.3
2.9
287
285
1,883
3,147
2,819
2,308
—
2,307
138
(54)
(190)
10,304
433
2,960
—
1,059
942
2,384
(30)
7,748
626
87
(0.66)
n/a
0.16
8.28
8.50
6.88
7.45
3.6
(10.0)
n/a
2.1
n/a
0.6
4.3
1,062
14.1
2.1
288
288
2,228
3,707
2,827
2,289
—
8,273
28,409
8,823
36,900
2,397
478
314
117
10,996
334
3,722
—
1,152
942
2,569
(163)
8,556
744
(327)
0.41
0.13
0.3
8.92
7.54
3.76
7.43
3.8
5.4
1.7
5.3
4.4
1.7
8.1
1,144
11.1
4.0
288
288
2,341
3,707
2,906
2,334
—
8,947
38,157
2,267
148
221
(24)
10,947
33
4,408
—
1,029
942
2,419
(190)
8,641
432
(573)
(0.09)
(0.17)
0.72
8.52
12.34
4.13
4.91
5.4
(1.2)
(2.3)
4.6
3.0
1.5
30.0
867
3.3
14.7
280
284
2,380
3,708
2,823
2,350
—
8,881
40,673
2,623
442
239
141
9,833
708
3,305
—
594
942
2,342
(96)
7,795
796
(292)
0.52
0.25
0.83
8.52
14.94
9.81
10.52
4.2
6.3
3.0
5.8
5.1
1.7
26.4
1,036
5.7
7.9
273
275
2,786
3,693
2,949
2,204
—
8,846
45,002
2,292
195
(12)
(71)
9,624
175
4,130
—
517
781
2,125
(16)
7,712
765
(703)
(0.27)
0.31
1.16
7.92
16.86
12.91
13.48
4.6
(3.2)
3.7
2.8
5.2
0.8
43.1
1,023
6.3
8.6
264
268
2,772
3,693
3,197
2,202
396
9,488
42,482
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Total capital for 2013 and 2014 has been revised to align with the 2015 calculation methodology.
In 2022, the adjusted EBITDA composition was amended to include the impact of closed exchange positions that are effectively settled by offsetting
positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which the
transactions occur. Therefore, the Company has applied this composition to 2022, 2021 and 2020 only. In 2019 and onwards adjusted EBITDA was
adjusted to exclude the impact of unrealized mark-to-market gains or losses. 2018 and 2017 amounts were revised.
2016 and 2015 amounts were revised due to other revisions to EBITDA or FFO measures in the MD&A.
2012 to 2020 are gross installed capacity, which reflects the basis of underlying results. Prior year figures are as previously reported.
Includes finance lease receivables.
In 2021, Gas was adjusted to include the segments previously known as Australian Gas and North American Gas and the gas generation assets from
the segment previously known as Alberta Thermal. Prior year figures were revised.
In 2021, Energy Transition was adjusted to include the segments previously known as Centralia and the coal generation assets from the segment
previously known as Alberta Thermal. Prior year figures were revised.
TransAlta Corporation 2023 Integrated Report
249
Earnings coverage = earnings (loss) before income taxes
+ net interest expense / 50 per cent dividends paid on
preferred shares + interest on debt - interest income
Dividend payout ratio based on FFO = common share
dividends paid / FFO - 50 per cent dividends paid on
preferred shares
Dividend coverage = FFO - cash dividends paid on
preferred shares + change in non-cash operating working
capital balances / cash dividends paid on common shares
Dividend yield = dividends paid per common share /
current year’s closing price
Ratio Formulas
lease
liabilities
Adjusted net debt to Adjusted EBITDA = long-term debt
and
including current portion +
exchangeable securities + fair value (asset) liability of
hedging instruments on debt + 50 per cent issued
preferred shares and exchangeable preferred shares -
cash and cash equivalents - principal portion of TransAlta
OCP
- PPA
termination payments
/ Adjusted EBITDA
restricted cash
Return on equity attributable to common shareholders =
net earnings (loss) attributable to common shareholders
excluding gain on discontinued operations or earnings on a
comparable basis
to common
shareholders excluding AOCI
/ equity attributable
Return on capital employed = earnings (loss) before
income taxes + net interest expense - net earnings
interests / total
(loss) attributable to non-controlling
capital - AOCI
250
TransAlta Corporation 2023 Integrated Report
Plant Summary
As at Dec. 31, 2023
Facility
Hydro
Barrier, AB
24 facilities
Bearspaw, AB
Belly River, AB
Bighorn, AB
Brazeau, AB
Cascade, AB
Ghost, AB
Horseshoe, AB
Interlakes, AB
Kananaskis, AB
Pocaterra, AB
Rundle, AB
Spray, AB
St. Mary, AB
Taylor, AB
Three Sisters, AB
Waterton, AB
Akolkolex, BC
Bone Creek, BC
Pingston, BC
Upper Mamquam, BC
Misema, ON
Moose Rapids, ON
Ragged Chute, ON
Ardenville, AB
Blue Trail and Macleod
Flats, AB
Castle River, AB(3)
Cowley North, AB
Garden Plain, AB
McBride Lake, AB
Oldman, AB
Sinnott, AB
Soderglen, AB
Summerview 1, AB
Summerview 2, AB
WindCharger battery
storage, AB
Windrise, AB
Kent Breeze, ON
Melancthon, ON(4)
Wolfe Island, ON
Kent Hills, NB(5)
Le Nordais, QC
New Richmond, QC
Total Hydro
Wind &
Battery Storage
29 facilities
Nameplate
capacity
(MW)(1)
Consolidated
interest
Gross
installed
capacity(1)
Ownership
(%)
Net capacity
ownership
interest
(MW)(1)
Region
Revenue
source
Contract
expiry date
13
17
3
120
355
36
54
14
5
19
15
50
112
2
13
3
3
10
19
45
25
3
1
7
944
69
69
44
20
130
75
4
7
71
68
66
10
206
20
200
198
167
98
68
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
13
17
3
120
355
36
54
14
5
19
15
50
112
2
13
3
3
10
19
23
25
3
1
7
922
69
69
44
20
130
38
4
7
36
68
66
10
206
20
200
198
167
98
68
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
83 %
100 %
100 %
13 Western Canada
Merchant
17 Western Canada
Merchant
3 Western Canada
Merchant
120 Western Canada
Merchant
355 Western Canada
Merchant
36 Western Canada
Merchant
54 Western Canada
Merchant
14 Western Canada
Merchant
5 Western Canada
Merchant
19 Western Canada
Merchant
15 Western Canada
Merchant
50 Western Canada
Merchant
112 Western Canada
Merchant
2 Western Canada
Merchant
13 Western Canada
Merchant
3 Western Canada
Merchant
3 Western Canada
Merchant
10 Western Canada
19 Western Canada
23 Western Canada
25 Western Canada
3
1
7
Eastern Canada
Eastern Canada
Eastern Canada
922
LTC(2)
LTC
LTC
LTC(12)
LTC
LTC
LTC
69 Western Canada
Merchant
69 Western Canada
Merchant
44 Western Canada
Merchant
20 Western Canada
Merchant
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2046
2031
2023
2025
2027
2030
2029
—
—
—
—
130 Western Canada
LTC
2034-2041
38 Western Canada
LTC
2024
4 Western Canada
Merchant
7 Western Canada
Merchant
36 Western Canada
Merchant
68 Western Canada
Merchant
66 Western Canada
Merchant
10 Western Canada
Merchant
—
—
—
—
—
—
206 Western Canada
20
Eastern Canada
200
Eastern Canada
198
Eastern Canada
139
Eastern Canada
98
Eastern Canada
68
Eastern Canada
LTC
LTC
LTC
LTC
LTC
LTC
LTC
2041
2031
2028-2031
2029
2045
2033
2033
TransAlta Corporation 2023 Integrated Report
251
As at Dec. 31, 2023
Facility
Nameplate
capacity
(MW)(1)
Consolidated
interest
Gross
installed
capacity(1)
Ownership
(%)
Net capacity
ownership
interest
(MW)(1)
Region
Revenue
source
Contract
expiry date
Antrim, NH
Big Level, PA
Lakeswind, MN
Wyoming Wind, WY
Skookumchuck, WA
Northern Goldfields
Battery, WA(8)
Mass Solar, MA(6)
North Carolina Solar,
NC(7)
Northern Goldfields,
WA(8)
Fort Saskatchewan, AB
Total Wind
Solar
4 facilities
Total Solar
Gas
17 facilities
Keephills 2, AB
Keephills 3, AB
Poplar Creek, AB(9)
Sheerness, AB(4)
Sundance 6, AB
Ottawa, ON
Sarnia, ON
Windsor, ON
Ada, MI
Fortescue River Gas
Pipeline, WA
Parkeston, WA(10)
Southern Cross, WA(11)
South Hedland, WA(12)
Total Gas
Energy Transition
Centralia, WA
2 facilities
Skookumchuck, WA
Total Energy Transition
Total
29
90
50
140
137
10
2046
21
122
100 %
100 %
100 %
100 %
49 %
100 %
100 %
100 %
38
100 %
181
118
395
463
230
800
401
74
499
72
29
N/A
110
245
150
3586
670
1
671
7,428
60 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
50 %
100 %
100 %
100 %
50 %
100 %
50 %
100 %
50 %
100 %
100 %
100 %
100 %
100 %
100 %
100 %
21
122
38
181
71
395
463
230
400
401
74
499
72
29
N/A
55
245
150
3,084
670
1
671
6,761
29
90
50
140
67
10
100 %
100 %
100 %
100 %
100 %
100 %
29
90
50
United States
United States
United States
140
United States
67
10
United States
Australia
1,904
1,876
21
United States
122
United States
Australia
38
181
LTC
LTC
LTC
LTC
LTC
LTC
LTC
LTC
LTC
2039
2034
2034
2028
2040
2038
2032-2045
2033
2038
35 Western Canada
LTC/Merchant
2029
395 Western Canada
Merchant
463 Western Canada
Merchant
—
—
230 Western Canada
LTC
2030
200 Western Canada
Merchant
401 Western Canada
Merchant
37
Eastern Canada
LTC/ Merchant
499
Eastern Canada
LTC
36
Eastern Canada
LTC/ Merchant
29
United States
N/A
Australia
LTC
LTC
55
245
150
2,775
Australia
LTC/Merchant
Australia
Australia
LTC
LTC
—
—
2033
2031
2031
2026
2035
2026
2038
2042
670
United States
LTC/ Merchant
2025(13)
1
United States
LTC
2025
671
6,425
(1) MW are rounded to the nearest whole number; columns may not add due to rounding. The gross installed capacity reflects the basis of consolidation of
underlying assets owned, net capacity ownership interest deducts capacity attributable to non-controlling interest in these assets and is calculated
after consolidation of underlying assets.
(2)
(3)
Long-term Contract.
Includes seven individual turbines at other locations.
(4) Comprised of two facilities.
(5) Comprised of three facilities.
(6) Comprised of four ground-mounted sites and four roof-top sites.
(7) Comprised of 20 sites.
(8) Comprises multiple facilities.
(9)
The Poplar Creek plant is operated by Suncor and ownership of the facility will transfer to Suncor in 2030.
(10) The Parkeston facility is contracted to October 2023 with early termination options that begin in 2021.
(11) Comprised of four facilities. Does not include Northern Goldfields facilities that re in the Wind and Solar segment.
(12) The South Hedland facility is contracted with Fortescue Metals Group Ltd. ("FMG") and Horizon Power.
(13) Contract is in place until 2025; however, Centralia Unit 1 was retired from service effective Dec. 31, 2020, and capacity decreased to 670 MW on
Jan. 1, 2021.
252
TransAlta Corporation 2023 Integrated Report
Sustainability Performance
Indicators
Corporate Statistics
Environment, Health and Safety ("EHS") Management Systems
EHS management system audits(1)
Health and Safety compliance audits(2)
Total EHS audits
Environmental Performance(3)
Resource or energy use(4)
Coal combustion (tonnes)
Natural gas combustion (GJ)
Diesel combustion (L)
Gasoline consumption: vehicle (L)
Diesel consumption: vehicle (L)
Propane consumption: vehicle (L)
Electricity: building operations (MWh)
Natural gas: building operations (GJ)
Propane: building operations (L)
Kerosene: building operations (L)
Total resource or energy use (GJ)
Greenhouse gas emissions(5)
Carbon dioxide (tonnes CO2e)
Methane (tonnes CO2e)
Nitrous oxide (tonnes CO2e)
Sulphur hexafluoride (tonnes CO2e)
Total scope 1 and 2 greenhouse gas emissions (tonnes CO2e)(6)
Greenhouse gas emission intensity (tonnes CO2e/MWh)(7) √
Scope 1 emissions (tonnes CO2e) √
Scope 1 emissions (% of total GHG emissions)
Scope 1 emissions reported to national regulatory bodies (%)
Scope 2 emissions (tonnes CO2e) √
Scope 2 emissions (% of total GHG emissions)
Total greenhouse gas emissions avoided (tonnes CO2e)(8)
Air emissions(9)
Total sulphur dioxide emissions (tonnes) √
Sulphur dioxide emission intensity (kg/MWh) √
Total nitrogen oxide emissions (tonnes) √
Nitrogen oxide emission intensity (kg/MWh) √
Total particulate matter emissions (tonnes) √
Particulate matter emission intensity (kg/MWh) √
2023
2022
2021
5
3
8
4
9
13
4
11
15
2023
2022
2021
2,492,000
2,181,000 4,094,000
123,067,000 130,023,000 106,768,000
6,950,000
6,706,000
7,596,000
610,000
609,000
864,000
2,324,000
3,275,000 6,705,000
12,000
12,000
6,000
126,000
152,000
174,000
89,000
35,000
119,000
110,000
169,000
189,000
0
3,000
65,000
197,028,000 194,954,000 203,716,000
10,846,000
10,169,000 12,420,000
26,000
36,000
24,000
25,000
41,000
59,000
80
150
370
10,908,000
10,233,000 12,505,000
0.41
0.40
0.53
10,871,000
10,179,000 12,447,000
100
100
99
100
99
100
37,000
54,000
58,000
0
1
1
2,280,000
2,744,000 2,602,000
1,100
0.04
1,200
0.05
7,300
0.31
11,000
11,000
15,000
0.40
460
0.02
0.43
360
0.02
0.65
2,200
0.09
TransAlta Corporation 2023 Integrated Report
253
Environmental Performance (continued)
Total mercury emissions (kilograms)(10) √
Mercury emission intensity (mg/MWh)(10) √
Water management (11)
Water withdrawal – water utility/municipality/customer (million m3)
Water withdrawal – surface water (million m3)
Water withdrawn – all sources (million m3) √
Water discharge – all sources (million m3) √
Water consumption (million m3) √
Water consumption intensity (m3/MWh)(12) √
Waste management
Diverted from Disposal - Non-Hazardous(13)
Recycled (tonnes)
Recycled (L)
Reuse (tonnes)
Storage (tonnes)(14)
Compost (tonnes)
2023
18
0.67
273
0
273
239
34
1.25
2022
21
0.83
233
0
233
207
26
1.03
2021
41
1.72
241
0
241
209
32
1.34
2,600
1,600
4,400
137,000
2,093,000
1,705,000
457,000
151,000
176,000
1,400
26,000
31,000
1
0
10
Total non-hazardous waste diverted from disposal (tonnes)
461,000
180,000
212,000
Diverted from Disposal - Hazardous(15)
Recycled (tonnes)
Recycled (L)
Total hazardous waste diverted from disposal (tonnes)
Total waste diverted from disposal (tonnes) √
Directed to Disposal - Non-Hazardous(16)
Landfill (tonnes)
Landfill (L)
Ash disposal:mine (tonnes)(17)
Ash disposal:lagoon (tonnes)(18)
Compostable (tonnes)
10
0
8
18,915,000
21,019,000 22,837,000
17,000
18,000
20,000
478,000
199,000
232,000
1,300
1,800
1,100
45,000
76,000
55,000
0
0
0
2,900
232,000
0
0
44,000
10
Total non-hazardous waste directed to disposal (tonnes)
1,300
4,800
277,000
Directed to Disposal - Hazardous(19)
Landfill (tonnes)
Landfill (L)
Total hazardous waste directed to disposal (tonnes)
Total waste directed to disposal (tonnes) √
Land use and reclamation(20)
0
80
220
4,600
52,000
26,000
10
130
250
1,300
4,900
277,000
Land used in mining activities – disturbed (cumulative hectares) √
12,600
12,600
12,600
Land used in mining activities – reclaimed (cumulative hectares) √
4,900
4,800
4,800
Reclamation of land used in mining activities (% of land disturbed) √
Land used in mining activities: disturbed minus reclaimed (hectares) √
Land used by facilities, offices and equipment (hectares) √
39
7,600
5,000
38
7,800
5,000
38
7,700
5,000
254
TransAlta Corporation 2023 Integrated Report
Total land use (cumulative hectares) √
Environmental Performance (continued)
Environmental incidents(21)
Significant environmental incidents
Regulatory non-compliance environmental incidents
Total environmental incidents √
Environmental enforcement actions(22)
Environmental fines ($ thousands)
Environmental spills(23)
Volume of significant environmental spills (m3)
Biodiversity-related incidents(24)
Critically Endangered
Endangered
Vulnerable
Near threatened
Total biodiversity-related incidents
Social Performance
Workplace practices
Employees
Number of full-time employees
Number of part-time employees
Number of contingent employees
Employees represented by independent trade union organizations (%)(25)
Voluntary employee turnover rate (%)(26)
Diversity
Women in workforce (% of all employees)
Women in senior management (%)
Women on Board of Directors (%)
Health and safety
Health and safety enforcement actions
Health and safety fines ($ thousands)
Employee and contractor fatalities √
Lost-time injury ("LTI") incidents (absence from work)(27) √
Medical aid ("MA") incidents (no absence from work)(28) √
Restricted work injury ("RWI") incidents (no absence from work)(29) √
Total recordable injuries to employees and contractors √
Exposure hours(30)
12,700
2023
12,700
12,700
2022
2021
0
0
0
0
0
0
0
0
0
0
0
0
1
1
2
35
246
0
0
0
0
0
0
2
2
1
3
6
0
0
0
0
0
2023
1,257
1,173
2022
`
1,222
1,150
2021
1,282
1,181
11
73
30
5
27
26
46
0
0
0
1
4
0
5
14
58
31
9
26
30
36
0
0
0
0
6
0
6
15
86
33
8
24
38
42
0
0
0
3
9
5
17
3,362,000
3,058,000 4,134,000
Total Recordable Injury Frequency ("TRIF") (employees and contractors)(31)√
0.30
0.39
0.82
Community relations
Community investments ($ millions)(32)
3.2
2.3
3.0
√ 2023 data has been assured to a limited assurance level by Ernst & Young LLP.
Please see "Discussion and Notes on Numbers" for footnote explanations.
TransAlta Corporation 2023 Integrated Report
255
Alignment of Sustainability Performance Indicators with Best
Practice Sustainability Reporting Frameworks
The following outlines our sustainability or ESG performance indicator alignment with key criteria of GRI and SASB.
Internally developed criteria are described in the footnotes to the Sustainability Performance Indicators.
Environment, Health and Safety ("EHS") Management Systems
Alignment with GRI or SASB standards
EHS management system audits
Health and Safety compliance audits
Total EHS audits
Environmental Performance
Resource or energy use
Coal combustion (tonnes)
Natural gas combustion (GJ)
Diesel combustion (L)
Gasoline consumption: vehicle (L)
Diesel consumption: vehicle (L)
Propane consumption: vehicle (L)
Electricity: building operations (MWh)
Natural gas: building operations (GJ)
Propane: building operations (L)
Kerosene: building operations (L)
Total resource or energy use (GJ)
Greenhouse gas emissions
Carbon dioxide (tonnes CO2e)
Methane (tonnes CO2e)
Nitrous oxide (tonnes CO2e)
Sulphur hexafluoride (tonnes CO2e)
Internally developed criteria
Internally developed criteria
Alignment with GRI or SASB standards
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
GRI 302-1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
Total scope 1 and 2 greenhouse gas emissions (tonnes CO2e)
Internally developed criteria
Greenhouse gas emission intensity (tonnes CO2e/MWh)
Scope 1 emissions (tonnes CO2e)
Scope 1 emissions (% of total GHG emissions)
Scope 1 emissions reported to national regulatory bodies (%)
Scope 2 emissions (tonnes CO2e)
Scope 2 emissions (% of total GHG emissions)
GRI 305-4
SASB IF-EU-110a.1
SASB IF-EU-110a.1
SASB IF-EU-110a.1
GRI 305-2
GRI 305-2
Total greenhouse gas emissions avoided (tonnes CO2e)
Internally developed criteria
Air emissions
Total sulphur dioxide emissions (tonnes)
Sulphur dioxide emission intensity (kg/MWh)
Total nitrogen oxide emissions (tonnes)
Nitrogen oxide emission intensity (kg/MWh)
Total particulate matter emissions (tonnes)
Particulate matter emission intensity (kg/MWh)
256
TransAlta Corporation 2023 Integrated Report
SASB IF-EU-120a.1
Internally developed criteria
SASB IF-EU-120a.1
Internally developed criteria
SASB IF-EU-120a.1
Internally developed criteria
Environmental Performance (continued)
Alignment with GRI or SASB Standards
Total mercury emissions (kilograms)
Mercury emission intensity (mg/MWh)
Water management
Water withdrawal – water utility/municipality/customer (million m3)
Water withdrawal – surface water (million m3)
Water withdrawn – all sources (million m3)
Water discharge – all sources (million m3)
Water consumption (million m3)
Water intensity (m3/MWh)
Waste management
Diverted from Disposal - Non-Hazardous
Recycled (tonnes)
Recycled (L)
Reuse (tonnes)
Storage (tonnes)
Total non-hazardous waste diverted from disposal (tonnes)
Diverted from Disposal - Hazardous
Recycled (tonnes)
Recycled (L)
Total hazardous waste diverted from disposal (tonnes)
Total waste diverted from disposal (tonnes)
Directed to Disposal - Non-Hazardous
Landfill (tonnes)
Landfill (L)
Ash disposal:mine (tonnes)
Ash disposal:lagoon (tonnes)
Compostable (tonnes)
Total non-hazardous waste directed to disposal (tonnes)
Directed to Disposal - Hazardous
Landfill (tonnes)
Landfill (L)
Total hazardous waste directed to disposal (tonnes)
Total waste directed to disposal (tonnes)
SASB IF-EU-120a.1
Internally developed criteria
SASB IF-EU-140a.1
SASB IF-EU-140a.1
SASB IF-EU-140a.1
Internally developed criteria
SASB IF-EU-140a.1
Internally developed criteria
GRI 306-4
GRI 306-4
GRI 306-4
GRI 306-4
GRI 306-4
GRI 306-4
GRI 306-4
GRI 306-4
GRI 306-4
GRI 306-5
GRI 306-5
GRI 306-5
GRI 306-5
GRI 306-5
GRI 306-5
GRI 306-5
GRI 306-5
GRI 306-5
GRI 306-5
TransAlta Corporation 2023 Integrated Report
257
Environmental Performance (continued)
Alignment with GRI or SASB Standards
Land use and reclamation
Land used in mining activities – disturbed (cumulative hectares)
Land used in mining activities – reclaimed (cumulative hectares)
Reclamation of land used in mining activities (% of land disturbed)
Land used in mining activities: disturbed minus reclaimed (hectares)
Land used by plants, offices and equipment (hectares)
Total land use (cumulative hectares)
Environmental incidents
Significant environmental incidents
Regulatory non-compliance environmental incidents
Total environmental incidents
Environmental enforcement actions
Environmental fines ($ thousands)
Environmental spills
Volume of significant spills (m3)
Biodiversity-related incidents
Critically Endangered
Endangered
Vulnerable
Near threatened
Total biodiversity-related incidents
Social Performance
Workplace practices
Employees
Number of full-time employees
Number of part-time employees
Number of contingent employees
Internally developed criteria
Internally developed criteria
Internally developed criteria
Internally developed criteria
Internally developed criteria
Internally developed criteria
Internally developed criteria
GRI 307-1
Internally developed criteria
GRI 307-1
GRI 307-1
GRI 306-3
Internally developed criteria
Internally developed criteria
Internally developed criteria
Internally developed criteria
Internally developed criteria
Alignment with GRI or SASB Standards
GRI 102-7
Internally developed criteria
Internally developed criteria
Internally developed criteria
Employees represented by independent trade union organizations (%)
Voluntary employee turnover rate (%)
Diversity
Women in workforce (% of all employees)
Women in senior management (%)
Women on Board of Directors (%)
GRI 102-41
GRI 401-1
GRI 405-1
GRI 405-1
GRI 405-1
258
TransAlta Corporation 2023 Integrated Report
Health and safety
Health and safety enforcement actions
Health and safety fines ($ thousands)
Employee and contractor Fatalities
Lost-time injury ("LTI") incidents (absence from work)
Medical aid ("MA") incidents (no absence from work)
Restricted work injury ("RWI") incidents (no absence from work)
Total injuries to employees and contractors
Exposure hours
Total Recordable Injury Frequency ("TRIF") (employees and contractors)
Community relations
Community investments ($ millions)
Internally developed criteria
Internally developed criteria
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
SASB IF-EU-320a.1
GRI 203-1
TransAlta Corporation 2023 Integrated Report
259
Discussion and Notes on Numbers
TransAlta strives to improve the accuracy and scope of our
sustainability performance data. We continually review our
processes and controls relating to the measurement and
calculation of key sustainability data annually. Several
footnotes appear throughout the statistical summary and
are intended to provide clarity on specific boundary
conditions, changes in methodology and definitions. For
questions or clarity on any key performance indicators,
please contact us at sustainability@transalta.com.
1.
EHS management system audits are conducted
our
annually
to
safety
environmental,
management systems.
conformance
assesses
health
and
to
2. Health and Safety compliance audits are conducted to
verify compliance to
internal health and safety
standards and procedures and defined occupational
health and safety regulatory requirements.
revisions
3. We have updated some of our historical figures
following a review of the data and a revision of our
that are
rounding methodology. Data
significant in magnitude have been discussed below.
Historical environmental performance figures have
been rounded based on the following methodology: i)
All environmental data between 0-100 are rounded to
the nearest whole number, 100-1,000 to the nearest
10, 1,000-10,000 to the nearest hundred, and above
10,000 to the nearest thousand; ii) Water data is
rounded to the nearest million; iii) Land use data,
which is smaller in magnitude compared with other
environmental indicators, is rounded to the nearest 100
to represent a more accurate picture of management
and progress. Some values may not sum to the
indicated total due to rounding.
4. Energy use is calculated and reported from TransAlta-
operated facilities, following the same approach we
is the
use for GHG emissions reporting, which
application of an ‘Operational Control’ boundary as per
guidance
the GHG Protocol: A Corporate
Accounting and Reporting Standard.
from
the
regulations
in
from
5. GHG emissions are calculated and reported from
line with carbon
facilities
TransAlta-operated
compliance
geographic
jurisdiction where the facility is located. For GHG
emissions that are not calculated using jurisdictional
carbon compliance guidance, we follow guidance from
the GHG Protocol: A Corporate Accounting and
Reporting Standard (specifically ‘Setting Organizational
Boundaries: Operational Control’ methodology). As per
the operational control methodology, TransAlta reports
100 per cent of GHG emissions from facilities at which
we are the operator. GHG emissions include emissions
from stationary combustion,
transportation use,
building use and fugitive emissions. If we were to use a
financial boundary, there would be no material impact.
260
TransAlta Corporation 2023 Integrated Report
We report both scope 1 and 2 emissions. We compile
our corporate GHG inventory using our business
segment GHG calculations. All of our scope 1
emissions (100 per cent) are reported to national
regulatory bodies in the country in which we operate.
This includes: Australia (National Greenhouse and
Energy Reporting), Canada (Greenhouse Gas Reporting
Program, NPRI) and the US (EPA). Our scope 1 and 2
emissions use global warming potentials and emissions
factors that vary with respect to regional compliance
guidance and include IPCC 5th Assessment Report,
Canada's GHG Inventory 1990-2019, US EPA eGRID
Summary Tables 2019 and Australia NGERS
Measurement Determination. An estimate of our scope
3 emissions can be found in our 2023 MD&A.
6. Total GHG emissions or CO2e emissions is the sum of
applicable gases which
include carbon dioxide,
methane, nitrous oxide and sulphur hexafluoride (SF6).
Consequently, the sum of scope 1 and 2 emissions will
equate to gross CO2e emissions or gross GHG
emissions.
7. GHG emission intensity is calculated by dividing total
operational emissions by 100 per cent of production
(MWh) from operated facilities, irrespective of financial
ownership.
implemented a different
approach to calculate the total production which
includes steam generation. As such, the 2021 GHG
intensity has been
include steam
revised
generation.
In 2022, we
to
8. Avoided emission is defined as the emissions that are
displaced from the power grid through renewables
generation instead of standard consumption via the
grid. This
is calculated by multiplying the total
renewable production with the grid carbon intensity of
the jurisdiction it operates in.
9. Air emissions which are applicable to TransAlta's
operations are NOx, SO2, particulate matter (PM2.5 and
PM10) and mercury. The applicable air emissions are
calculated and reported from TransAlta-operated
facilities, following the same approach we use for GHG
emissions reporting, which is the application of an
‘Operational Control’ boundary as per guidance from
the GHG Protocol: A Corporate Accounting and
Reporting Standard. Air emissions are expressed in
tonnes, except for mercury emissions, which are
represented in kilograms. Particulate matter emissions
include both PM2.5 and PM10. Air emission intensities
are calculated by dividing total operational emissions
by 100 per cent of production (MWh) from operated
facilities, irrespective of financial ownership. In 2022,
we implemented a different approach to calculate the
total production which includes steam generation. As
such, the 2021 air emissions intensities have been
revised to include steam generation.
10. Mercury emissions have been restated for year 2022
due to conversion errors.
from
11. Water use is calculated and reported from TransAlta-
operated facilities, following the same approach we
use for GHG emissions reporting, which
is the
application of an ‘Operational Control’ boundary as per
the GHG Protocol: A Corporate
guidance
Accounting and Reporting Standard. Total water
consumed is measured by total water withdrawal
minus water discharge, where water withdrawal are
sourced from surface water, groundwater, third-party,
or non-freshwater, and water discharge refers to the
volume of
the organization's
boundary and released to surface water, groundwater,
or to third parties. Water is used primarily for cooling
by our thermal power plants. Evaporative losses from
cooling ponds and cooling towers account for the
majority of consumptive
lost to
evaporation is not returned directly to the water body,
but the water remains in the hydrologic cycle.
loss. The water
freshwater
leaving
12. Water
intensity
is calculated by dividing
total
operational water consumption (m3) by 100 per cent of
production (MWh) from operated facilities, irrespective
of financial ownership. In 2022, we implemented a
different approach to calculate the total production
which includes steam generation. As such, the 2021
water consumption intensity has been revised to
include steam generation.
refuse
13. Non-hazardous waste diverted from disposal includes,
but is not limited to, the recycling or reuse of water
treatment chemicals, coal
(including ash
byproducts), metals, paper, cardboard and building
materials. We measure and report the total weight of
all types of waste generated and use several methods
for calculation,
including direct measurement of
quantity on site, by transporters at the point of
shipping or loading (consistent with shipping papers),
by waste disposal contractor at the point of waste
disposal or by transporters, at the point of shipping or
loading, and engineering estimates or process
knowledge. The unit measurement for non-hazardous
waste diverted from disposal is reported as metric ton.
14. Storage waste is ash product from coal production,
which is stored onsite for treatment prior to sales for
cement production.
15. Hazardous wastes can be harmful to people, plants,
animals or the environment, either in the short or the
long term, and TransAlta is required in all of its
operating jurisdictions to follow proper procedures for
recycling of these materials. We measure and report
the total weight of all types of waste generated and
use several methods for calculation, including direct
measurement of quantity on site, by transporters at
the point of shipping or loading (consistent with
shipping papers), by waste disposal contractor at the
point of waste disposal or by transporters, at the point
of shipping or loading, and engineering estimates or
for
process knowledge. The unit measurement
hazardous waste is reported as metric ton.
16. Non-hazardous waste directed to disposal includes,
but is not limited to, the disposal of water treatment
chemicals, coal refuse (including ash byproducts),
metals, paper, cardboard and building materials. We
measure and report the total weight of all types of
waste generated and use several methods
for
calculation, including direct measurement of quantity
on site, by transporters at the point of shipping or
loading (consistent with shipping papers), by waste
disposal contractor at the point of waste disposal or by
transporters, at the point of shipping or loading, and
engineering estimates or process knowledge. The unit
measurement for non-hazardous waste diverted from
disposal is reported as metric ton.
17. Ash disposal: mine is fly ash and bottom ash from coal
production, which is treated and then returned to its
original source, the mine, for landfill/disposal. In 2023,
we reported zero as we have ceased coal operations
in Canada; therefore, we have no ash waste to dispose
of.
18. Ash disposal: lagoon is fly ash and bottom ash from
Keephills coal production, which is treated and then
sent to ash lagoons for disposal. In 2023, we reported
zero as we have ceased coal operations in Canada;
therefore, we have no ash waste to dispose of.
19. Hazardous wastes can be harmful to people, plants,
animals or the environment, either in the short or the
long term, and TransAlta is required in all of its
operating jurisdictions to follow proper procedures for
landfill/recycling of these materials. We measure and
report the total weight of all types of waste generated
and use several methods for calculation, including
direct measurement of quantity on site, by
transporters at the point of shipping or
loading
(consistent with shipping papers), by waste disposal
contractor at the point of waste disposal or by
transporters, at the point of shipping or loading, and
engineering estimates or process knowledge. The unit
measurement for hazardous waste is reported as
metric ton.
TransAlta Corporation 2023 Integrated Report
261
23. Spills generally happen in low environmental impact
areas and are almost always contained and fully
recovered. It is extremely rare that we experience
the
large spills, which could adversely
environment and the Company.
impact
24. Biodiversity
incidents are
the number of
total
biodiversity-related incidents that affected habitats
included on the Red List of the
and species
International Union for Conservation of Nature and are
classified as near-threatened, vulnerable, endangered
and critically endangered.
25. In 2023, TransAlta employed approximately 374
unionized workers working primarily in our operational
business units.
26. Voluntary
turnover
is aligned with our Human
Resources voluntary turnover reporting methodology.
As per this methodology, voluntary turnover is any full-
time, part-time or contingent employee initiated exit,
excluding retirement. Summer students and temporary
workers are not considered within voluntary turnover.
Health and safety enforcement actions are a violation
of or non-compliance with regulations or exceedance
of limits in company operating approvals that result in
enforcement action including stop work orders, fines
or suspension of operating approvals.
27. Lost-time injuries ("LTIs") are injuries that resulted in
the worker being away from work beyond the day of
the injury.
28. Medical aids ("MAs") are injuries that resulted in
medical treatment beyond first aid.
29. Restricted work injuries ("RWIs") are injuries that
resulted in the worker being unable to perform all
normally scheduled and assigned work activities.
30. Exposure hours are total hours worked by all TransAlta
employees and contractors, and include full-time, part-
time, direct, contract, executive, labour, salary, hourly
and seasonal employees in all locations, but exclude
prime contractors. Exposure hours have been rounded
to the nearest thousand.
31. Total Recordable Injury Frequency ("TRIF") measures
restricted work, medical aid and lost-time injuries per
200,000 hours worked. It does not include near miss
as per the SASB IF EU 320a.1 criteria.
32. Cumulative of donations and sponsorship totals in the
respective calendar year. This investment figure does
not include donations from our employees.
similar
condition,
pre-development
20. Land used in mining activities – disturbed refers to the
total active footprint of our mining operations, which
includes the cumulative hectares for land cleared of
vegetation, soil disturbed, ready for reclamation, soils
placed, and permanently reclaimed: (i) Disturbed
means soil has been disturbed; (ii) Cleared means
vegetation has been removed and soils are intact; (iii)
Reclamation means the restoration of disturbed lands
other
to
economically productive use, or natural or semi-natural
habitat. Land reclamation refers to the ratio between
the land that has been permanently or temporarily
reclaimed and the total active footprint of our mining
operations. Reclamation is presented as a cumulative
number; therefore, the total number of hectares
reported from year to year may increase depending on
whether reclamation has occurred or whether re-
disturbance of previously
reclaimed areas was
required. Total land use refers to the total active
footprint of all our operations or the sum of the land
used in mining activities plus land used by plants,
offices and equipment.
that
impact
significant
this classification
incidents are separated
environmental
into
two
21. Environmental
categories:
incidents
(internally defined) and regulatory non-compliance
environmental incidents (aligned to GRI 307-1). We
define significant environmental
incidents as an
incident that is internally classified as moderate,
significant, major or extreme, that resulted in an impact
to the ecosystem that is reversible or irreversible.
Factors
include
mortalities of greater than 0.01 per cent of a given
species when compared to the overall population, as
well as other relevant qualitative factors. We define
regulatory non-compliance environmental incidents as
violations or non-compliance
regulations or
exceedance of limits in company operating approvals
that result in enforcement action including fines or
stop work orders that suspend overall facility or site
operations, but did not have an
impact on the
environment. For example, a technical issue with a
computer system for gathering real-time data could
cause us to be out of compliance with local regulation
or our EMS, but there is no direct consequence for the
physical environment.
to
22. Environmental enforcement actions are a violation or
non-compliance to regulations or exceedance of limits
in company operating approvals that result in an
impact on the environment and enforcement action
including stop work orders, fines or suspension of
operating approvals.
262
TransAlta Corporation 2023 Integrated Report
Independent Practitioner’s
Assurance Report
To Management of TransAlta Corporation
Scope
We have been engaged by TransAlta Corporation (the “Company”, or “TransAlta”) to perform a ‘limited assurance
engagement,’ as defined by International Standards on Assurance Engagements, hereafter referred to as the
engagement, to report on TransAlta’s performance indicators detailed in the accompanying schedule (the “Subject
Matter”) for the year ended December 31, 2023, contained in TransAlta’s 2023 Annual Integrated Report (the “Report”).
Other than as described in the preceding paragraph, which sets out the scope of our engagement, this engagement did
not include performing assurance procedures on the remaining information included in the Report, and accordingly, we do
not express a conclusion on this information.
Criteria Applied by TransAlta
In preparing the Subject Matter, TransAlta applied relevant guidance contained within the Sustainability Accounting
Standards Board (“SASB”) Standards, Global Reporting Initiative (“GRI”) Sustainability Reporting Standards, and internally
developed criteria, as detailed in the accompanying Schedule, collectively referred to herein as (the “Criteria”). The
internally developed Criteria were specifically designed for the preparation of the Report. As a result, the Subject Matter
may not be suitable for another purpose.
TransAlta’s Responsibilities
TransAlta’s management is responsible for selecting the Criteria, and for presenting the Subject Matter in accordance with
that Criteria, in all material respects. This responsibility includes establishing and maintaining internal controls, maintaining
adequate records and making estimates that are relevant to the preparation of the Subject Matter, such that it is free from
material misstatement, whether due to fraud or error.
EY’s Responsibilities
Our responsibility is to express a conclusion on the presentation of the Subject Matter based on the evidence we
have obtained.
We conducted our engagement in accordance with the International Standard for Assurance Engagements (“ISAE”) 3000,
Assurance Engagements Other than Audits or Reviews of Historical Financial Information (“ISAE 3000”) and ISAE 3410,
Assurance Engagements on Greenhouse Gas Statements (“ISAE 3410”). These standards require that we plan and
perform our engagement to obtain limited assurance about whether, in all material respects, the Subject Matter is
presented in accordance with the Criteria, and to issue a report. The nature, timing and extent of the procedures selected
depend on our judgment, including an assessment of the risk of material misstatement, whether due to fraud or error.
We believe that the evidence obtained
assurance conclusion.
is sufficient and appropriate to provide a basis for our
limited
Our Independence and Quality Management
We have complied with the relevant rules of professional conduct / code of ethics applicable to the practice of public
accounting and related to assurance engagements, issued by various professional accounting bodies, which are founded
on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behaviour.
Our firm applies Canadian Standard on Quality Management 1, Quality Management for Firms that Perform Audits or
Reviews of Financial Statements, or Other Assurance or Related Services Engagements, which requires us to design,
implement and operate a system of quality management including policies or procedures regarding compliance with
ethical requirements, professional standards and applicable legal and regulatory requirements.
TransAlta Corporation
2023 Integrated Report
263
Description of Procedures Performed
Procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a
reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is
substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been
performed. Our procedures were designed to obtain a limited level of assurance on which to base our conclusion and do
not provide all the evidence that would be required to provide a reasonable level of assurance.
Although we considered the effectiveness of management’s internal controls when determining the nature and extent of
our procedures, our assurance engagement was not designed to provide assurance on internal controls. Our procedures
did not include testing controls or performing procedures relating to checking aggregation or calculation of data within
IT systems.
A limited assurance engagement consists of making enquiries, primarily of persons responsible for preparing the Subject
Matter and related information, and applying analytical and other appropriate procedures.
Our procedures included:
• Conducting interviews with relevant personnel to obtain an understanding of the reporting processes;
• Inquiries of relevant personnel who are responsible for the Subject Matter including, where relevant, observing and
inspecting systems and processes for data aggregation and reporting in accordance with the Criteria;
• Assessing the accuracy of data, through analytical procedures and limited reperformance of calculations, where
applicable, and tested, on a limited sample basis, underlying source information to support completeness and accuracy
of the Subject Matter; and
• Reviewing presentation and disclosure of the Subject Matter in the Report.
We also performed such other procedures as we considered necessary in the circumstances.
Inherent Limitations
The Greenhouse Gas ("GHG") quantification process is subject to scientific uncertainty, which arises because of
incomplete scientific knowledge about the measurement of GHGs. Additionally, GHG procedures are subject to estimation
(or measurement) uncertainty resulting from the measurement and calculation processes used to quantify emissions
within the bounds of existing scientific knowledge.
Non-financial information, such as the Subject Matter, is subject to more inherent limitations than financial information,
given the more qualitative characteristics of the subject matter and the methods used for determining such information.
The absence of a significant body of established practice on which to draw allows for the selection of different but
acceptable evaluation techniques which can result in materially different evaluation and can impact comparability
between entities and over time.
Conclusion
Based on our procedures and the evidence obtained, nothing has come to our attention that causes us to believe that the
Subject Matter for the year ended December 31, 2023, is not prepared, in all material respects, in accordance with
the Criteria.
February 22, 2024
Calgary, Canada
264
TransAlta Corporation 2023 Integrated Report
Schedule
limited assurance engagement was performed on the following Subject Matter for the year ended
Our
December 31, 2023:
Performance Indicator
Criteria
Greenhouse Gas Emissions
Scope 1 emissions
SASB IF-EU-110a.1
Scope 2 emissions
GRI 305-2
Greenhouse gas emission
intensity
GRI 305-4
Air Emissions
Reported
Value(1)
Unit of Measure
10,871,000
Tonnes CO2e
37,000
Tonnes CO2e
0.41 Tonnes CO2e /MWh
Total sulphur dioxide emissions SASB IF-EU-120a.1
1,100
Tonnes
Sulphur dioxide emission
intensity
Internally developed criteria(2)
Total nitrogen oxide emissions
SASB IF-EU-120a.1
0.04
11,000
kg/MWh
Tonnes
Internally developed criteria(2)
0.40
kg/MWh
Nitrogen oxide emission
intensity
Total particulate matter
emissions
Particulate matter emission
intensity
Total mercury emissions
Mercury emission intensity
Water Management
SASB IF-EU-120a.1
Internally developed criteria(2)
SASB IF-EU-120a.1
Internally developed criteria(2)
Water withdrawn – all sources
Water discharge – all sources
Water consumption
Water consumption intensity
SASB IF-EU-140a.1
Internally developed criteria(2)
SASB IF-EU-140a.1
Internally developed criteria(2)
Waste Management
Total waste diverted from
disposal
GRI 306-4
Total waste directed to disposal GRI 306-5
Land Use and Reclamation
Land used in mining activities –
disturbed
Land used in mining activities –
reclaimed
Reclamation of land used in
mining activities
Internally developed criteria(2)
Internally developed criteria(2)
460
0.02
18
0.67
273
239
34
1.25
Tonnes
kg/MWh
kg
mg/MWh
Million m3
Million m3
Million m3
m3/MWh
478,000
1,300
Tonnes
Tonnes
12,600
4,900
Cumulative
hectares
Cumulative
hectares
Internally developed criteria(2)
39 % of land disturbed
TransAlta Corporation 2023 Integrated Report
265
Performance Indicator
Criteria
Land used in mining activities:
disturbed minus reclaimed
Land used by facilities, offices
and equipment
Internally developed criteria(2)
Internally developed criteria(2)
Total land use
Internally developed criteria(2)
Environmental Incidents
Reported
Value(1)
Unit of Measure
7,600
5,000
12,700
Hectares
Hectares
Cumulative
hectares
Total environmental incidents
Internally developed criteria(2)
0
Number
Health and Safety
Employee and contractor
fatalities
SASB IF-EU-320a.1(3)
Lost-time injury (LTI) incidents
SASB IF-EU-320a.1(3)
Medical aid (MA) incidents
SASB IF-EU-320a.1(3)
Restricted work injury
(RWI) incidents
Total recordable injuries to
employees and contractors
Total Recordable Injury
Frequency (TRIF) (employees
and contractors)
SASB IF-EU-320a.1(3)
SASB IF-EU-320a.1(3)
0
1
4
0
5
Number
Number
Number
Number
Number
SASB IF-EU-320a.1(3)
0.30
Rate
(1)
All figures have been rounded in accordance with footnote 3 in the Sustainability Performance Indicators section of the Report.
(2) As described in the footnotes to the Sustainability Performance Indicators section of the Report.
(3) Other criteria, included in the SASB Disclosure IF-EU-320a.1 (3), near miss frequency rate (NMFR) is excluded from the scope of our limited assurance
engagement.
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TransAlta Corporation 2023 Integrated Report
Shareholder Information
Special Services for Registered Shareholders
Service
Description
Direct deposit for dividend payments
Automatically have dividend payments deposited to your bank account
Account consolidations
Eliminate costly duplicate mailings by consolidating account registrations
Address changes and share transfers
Receive tax splits and dividends without the delays resulting from address
and ownership changes
Stock Splits and Share Consolidations
Date
May 8, 1980
February 1, 1988
Events
Stock split
Stock split(1)
December 31, 1992
Reorganization — TransAlta Utilities shares exchanged for TransAlta Corporation shares(2) 1:1
The valuation date value of common shares owned on December 31, 1971, adjusted for stock splits, is $4.54 per share.
(1)
(2)
The adjusted cost base for shares held on January 31, 1988, was reduced by $0.75 per share following the February 1, 1988, share split.
TransAlta Utilities Corporation became a wholly owned subsidiary of TransAlta Corporation as a result of this reorganization.
Dividend Declaration for Common Shares
Dividends are paid quarterly as determined by the Board. Dividends on our common shares are at the discretion of the
Board. In determining the payment and level of future dividends, the Board considers our financial performance, results of
operations, cash flow and needs with respect to financing our ongoing operations and growth, balanced against returning
capital to shareholders. The Board continues to focus on building sustainable earnings and cash flow growth.
Common Share Dividends Declared in 2023
Payment Date
April 1, 2023
July 1, 2023
Oct. 1, 2023
Jan. 1, 2024
Record Date
Ex-Dividend Date Dividend
March 1, 2023
Feb. 28, 2023
$0.055
June 1, 2023
May 31, 2023
$0.055
Sept. 1,2023
Aug. 31, 2023
$0.055
Dec. 1, 2023
Nov. 30, 2023
$0.055
TransAlta Corporation 2023 Integrated Report
267
Submission of Concerns Regarding Accounting or
Auditing Matters
TransAlta has adopted a procedure for employees,
shareholders or others to report concerns or complaints
regarding accounting or other matters on an anonymous,
confidential basis to the Audit, Finance and Risk Committee
of the Board of Directors. Such submissions may be
directed to the Audit, Finance and Risk Committee c/o the
Chief Officer, Legal, Regulatory and External Affairs, of
the Company.
Dividend Declaration for Preferred Shares
Series A: Fixed cumulative preferential cash dividends are
paid quarterly when declared by the Board at the annual
rate of $0.71924 per share from and including March 31,
2021, to, but excluding, March 31, 2026.
Series B: Floating cumulative preferential cash dividends
are paid quarterly when declared by the Board from
and
to, but excluding,
March 31, 2026.
including March 31, 2021,
Series C: Fixed cumulative preferential cash dividends are
paid quarterly when declared by the Board at the annual
rate of $1.46352 per share from and including June 30,
2022, to, but excluding, June 30, 2027.
Series D: Floating cumulative preferential cash dividends
are paid quarterly when declared by the Board from and
including June 30, 2022, to, but excluding, June 30, 2027.
Series E: Fixed cumulative preferential cash dividends are
paid quarterly when declared by the Board at the annual
rate of $1.72352 per share from and including September
30, 2022, to, but excluding, September 30, 2027.
Series G: Fixed cumulative preferential cash dividends are
paid quarterly when declared by the Board at the annual
rate of $1.247 per share from and including September 30,
2019, to, but excluding, September 30, 2024.
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TransAlta Corporation 2023 Integrated Report
Preferred Share Dividends Declared in 2023
Series A
Payment Date
Record Date
Ex-Dividend Date
March 31, 2023
June 30, 2023
Sept. 30, 2023
Dec. 31, 2023
March 31, 2024
Series B
Payment Date
March 31, 2023
June 30, 2023
Sept. 30, 2023
Dec. 31, 2023
March 31, 2024
Series C
Payment Date
March 31, 2023
June 30, 2023
Sept. 30, 2023
Dec. 31, 2023
March 31, 2024
Series D
Payment Date
March 31, 2023
June 30, 2023
Sept. 30, 2023
Dec. 31, 2023
March 31, 2024
Series E
Payment Date
March 31, 2023
June 30, 2023
Sept. 30, 2023
Dec. 31, 2023
March 31, 2024
Series G
Payment Date
March 31, 2023
June 30, 2023
Sept. 30, 2023
Dec. 31, 2023
March 31, 2024
March 1, 2023
June 1, 2023
Sept. 1, 2023
Dec. 1, 2023
March 1, 2024
Record Date
March 1, 2023
June 1, 2023
Sept. 1, 2023
Dec. 1, 2023
March 1, 2024
Record Date
March 1, 2023
June 1, 2023
Sept. 1, 2023
Dec. 1, 2023
March 1, 2024
Record Date
March 1, 2023
June 1, 2023
Sept. 1, 2023
Dec. 1, 2023
March 1, 2024
Record Date
March 1, 2023
June 1, 2023
Sept. 1, 2023
Dec. 1, 2023
March 1, 2024
Record Date
March 1, 2023
June 1, 2023
Sept. 1, 2023
Dec. 1, 2023
March 1, 2024
Feb. 28, 2023
May 31, 2023
Aug. 31, 2023
Nov. 30, 2023
Feb. 28, 2024
Ex-Dividend Date
Feb. 28, 2023
May 31, 2023
Aug. 31, 2023
Nov. 30, 2023
Feb. 28, 2024
Ex-Dividend Date
Feb. 28, 2023
May 31, 2023
Aug. 31, 2023
Nov. 30, 2023
Feb. 28, 2024
Ex-Dividend Date
Feb. 28, 2023
May 31, 2023
Aug. 31, 2023
Nov. 30, 2023
Feb. 28, 2024
Ex-Dividend Date
Feb. 28, 2023
May 31, 2023
Aug. 31, 2023
Nov. 30, 2023
Feb. 28, 2024
Ex-Dividend Date
Feb. 28, 2023
May 31, 2023
Aug. 31, 2023
Nov. 30, 2023
Feb. 28, 2024
Dividend
$0.17981
$0.17981
$0.17981
$0.17981
$0.17981
Dividend
$0.37991
$0.41100
$0.41545
$0.45288
$0.43958
Dividend
$0.36588
$0.36588
$0.36588
$0.36588
$0.36588
Dividend
$0.45578
$0.47769
$0.48287
$0.52030
$0.50609
Dividend
$0.43088
$0.43088
$0.43088
$0.43088
$0.43088
Dividend
$0.31175
$0.31175
$0.31175
$0.31175
$0.31175
Dividends are paid on the last day of the month in March, June, September and December. When a dividend payment
date falls on a weekend or holiday, the payment is made on the following business day. Only dividend payments that have
been approved by the Board of Directors are included in this table. The Board of Directors has also declared dividends on
the Series I Preferred Shares, which are held by an affiliate of Brookfield Renewable Partners.
TransAlta Corporation 2023 Integrated Report
269
Voting Rights
Common shareholders receive one vote for each common share held.
Annual Meeting
The Annual and Special Meeting of Shareholders will be held in a virtual-only meeting format at 11:00 a.m., Mountain
standard time, on Thursday, April 25, 2024.
Transfer Agent
Computershare Trust Company of Canada
Suite 800, 324-8th Avenue SW
Calgary, Alberta T2P 2Z2
Phone
Fax
North America:
1.800.564.6253 toll-free
Outside North America:
514.982.7555
North America:
1.888.453.0330 toll-free
Outside North America:
403.267.6529
Website:
www.investorcentre.com
Exchanges
Toronto Stock Exchange (TSX)
New York Stock Exchange (NYSE)
Ticker Symbols
TransAlta Corporation common shares: TSX: TA, NYSE: TAC
TransAlta Corporation preferred shares: TSX: TA.PR.D, TA.PR.E,
TA.PR.F, TA.PR.G, TA.PR.H, TA.PR.J
Additional Information
Requests can be directed to:
Investor Relations
TransAlta Corporation
TransAlta Place
Suite 1400, 1100 1st Street SE
Calgary, Alberta T2G 1B1
Phone
Email
North America:
1.800.387.3598 toll-free
Calgary/outside North America:
403.267.2520
investor_relations@transalta.com
Website:
www.transalta.com
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TransAlta Corporation 2023 Integrated Report
Shareholder Highlights
Ten-Year Total Shareholder Return vs. S&P/TSX
Composite Index
Year ended Dec. 31 ($)
TransAlta
S&P/TSX
14
100
100
15
51
89
16
79
104
17
81
111
18
62
98
19
105
117
20
112
119
21
165
145
22
145
132
23
134
143
This chart compares what $100 invested in TransAlta and the S&P/TSX Composite Index at the end of 2014 would be worth today, assuming the
reinvestment of all dividends.
Source: FactSet
Ten-Year Market Value vs. Book Value
Year ended Dec. 31
($ per share)
Market Value
Book Value
Data is from 2014 onwards.
Source: FactSet and TransAlta
14
15
16
17
18
19
20
21
22
23
10.52
4.91
7.43
7.45
5.59
9.28
9.67
14.05
12.11
11.02
8.52
8.52
8.92
8.28
7.16
7.14
5.13
2.37
0.62
2.16
Monthly Volume and Market Prices
2023
Jan
Feb Mar
Apr May
Jun
Jul
Aug
Sep Oct
Nov
Dec
Volume (millions)
11
14
14
11
12
12
12
13
14
24
18
14
TSX closing price ($ per share)
12.92 11.06 11.82 12.08 13.08 12.40 13.45 12.97 11.83 10.15 11.04 11.02
Source: FactSet
Return on Common Shareholders' Equity
(%)
ROE
Source: TransAlta
14
15
16
17
18
19
20
21
22
23
6.3
(1.2)
5.4 (10.0) (15.8)
3.3 (30.3) (116.6)
1.0
84.8
TransAlta Corporation 2023 Integrated Report
271
Corporate Information
Corporate Governance:
New York Stock Exchange
Disclosure Differences
TransAlta’s Corporate Governance Guidelines, Board
Charter, Committee Charters, position descriptions for
the Chair and President & CEO, and codes of business
conduct and ethics are available on our website at
www.transalta.com. Also available on our website is a
summary of the significant ways in which TransAlta’s
corporate governance practices differ from those
required to be followed by US domestic companies
under the New York Stock Exchange’s listing standards.
Currently there are no significant differences between
our governance practices and those of the New York
Stock Exchange.
Ethics Helpline
The Board of Directors has established an anonymous
and confidential Internet portal, email address and
toll-free telephone number for employees, contractors,
shareholders and other stakeholders who wish to report
accounting irregularities, ethical violations or any other
matters they wish to bring to the attention of the Board.
TransAlta Corporate Officers
John Kousinioris
President and Chief Executive Officer
Todd Stack
Executive Vice President, Finance and
Chief Financial Officer
Jane Fedoretz
Executive Vice President, People, Culture and Chief
Administrative Officer
Kerry O'Reilly Wilks
Executive Vice President, Growth and Energy Marketing
Chris Fralick
Executive Vice President, Generation
Blain van Melle
Executive Vice President, Commercial and
Customer Relations
Aron Willis
Executive Vice President, Project Delivery
and Construction
David Little
Senior Vice President, Growth
Brent Ward
Senior Vice President, M&A, Strategy and Treasurer
The Ethics Helpline phone number is 1.855.374.3801
(US/Canada) and 1.800.40.5308 (Australia)
Michelle Cameron
Vice President and Corporate Controller
Internet portal: transalta.com/ethics-helpline
Email: ethics_helpline@transalta.com
Any communications to the Board of Directors may also
be sent to corporate_secretary@transalta.com.
Scott Jeffers
Acting Executive Vice President, Legal and
Corporate Secretary
272
TransAlta Corporation 2023 Integrated Report
Glossary of Key Terms
Adjusted Availability
Availability
Availability is adjusted when economic conditions exist,
such that planned routine and major maintenance activities
are scheduled to minimize expenditures. In high price
environments, actual outage schedules would change to
accelerate the generating unit's return to service.
A measure of time, expressed as a percentage of
continuous operation - 24 hours a day, 365 days a year -
that a generating unit is capable of generating electricity,
regardless
actually
generating electricity.
of whether
not
or
is
it
Alberta Electric System Operator (AESO)
Balancing Pool
Alberta Electric System Operator; the independent system
operator and
the Alberta
Interconnected Electric System.
regulatory authority
for
Alberta Hydro Assets
The Company's hydroelectric assets owned through a
wholly owned subsidiary, TA Alberta Hydro LP. These
assets are located in Alberta and consist of the Barrier,
Bearspaw, Bighorn, Brazeau, Cascade, Ghost, Horseshoe,
Interlakes, Kananaskis, Pocaterra, Rundle, Spray and Three
Sisters hydro facilities.
Alberta Thermal
The business segment previously disclosed as Canadian
Coal has been renamed to reflect the ongoing conversion
of the boilers to burn gas in place of coal. The segment
includes the legacy and converted generating units at our
Sundance and Keephills sites and
the
Highvale mine.
includes
Ancillary Services
those services
As defined by the Electric Utilities Act, ancillary services
the
required
are
interconnected electric system is operated in a manner
that provides a satisfactory
level of service with
acceptable levels of voltage and frequency.
to ensure
that
AUC
Alberta Utilities Commission (AUC).
The Balancing Pool was established in 1999 by the
Government of Alberta to help manage the transition to
competition in Alberta's electric industry. Their current
obligations and responsibilities are governed by the
Electric Utilities Act (effective June 1, 2003) and the
Balancing Pool Regulation. For more information go to
www.balancingpool.ca.
Boiler
A device for generating steam for power, processing or
heating purposes, or for producing hot water for heating
purposes or hot water supply. Heat from an external
combustion source is transmitted to a fluid contained
within the tubes of the boiler shell.
Capacity
The rated, continuous load-carrying ability of generation
equipment, expressed in megawatts.
Cash-Generating Unit (CGU)
A cash-generating unit is the smallest identifiable group of
assets that generates cash
largely
independent of the cash inflows from other assets or
groups of assets, and goodwill is allocated to each CGU or
group of CGUs that is expected to benefit from the
synergies of the acquisition from which the goodwill arose.
inflows that are
Centralia
The business segment previously disclosed as US Coal has
been renamed to reflect the sole asset.
TransAlta Corporation 2023 Integrated Report
273
Cogeneration
Funds from Operations (FFO)
A generating facility that produces electricity and another
form of useful thermal energy (such as heat or steam) used
for industrial, commercial, heating or cooling purposes.
Calculated as cash flow from operating activities before
changes in working capital and is adjusted for transactions
the Company believes are not
and amounts
representative of ongoing cash flows from operations.
that
Disclosure Controls and Procedures (DC&P)
is
Refers to controls and other procedures designed to
ensure that information required to be disclosed in the
reports filed by the Company or submitted under securities
legislation
recorded, processed, summarized and
reported within the time frame specified in applicable
securities legislation. DC&P include, without limitation,
controls and procedures designed
that
information required to be disclosed by the Company in its
reports that it files or submits under applicable securities
to
legislation
management, including the Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
is accumulated and communicated
to ensure
Dispatch Optimization
Purchasing power
when economical.
to
fulfil contractual obligations,
Emissions Performance Standards ("EPS")
Under the Government of Ontario, emission performance
standards establish greenhouse gas (GHG) emissions limits
for covered facilities.
Environmental Management Systems (EMS)
A set of processes and practices that enable an
organization to reduce its environmental impacts and
increase its operating efficiency.
EPCs
Gigajoule (GJ)
A metric unit of energy commonly used in the energy
industry. One GJ equals 947,817 British thermal units (Btu).
One GJ is also equal to 277.8 kilowatt hours.
Gigawatt (GW)
A measure of electric power equal to 1,000 megawatts.
Gigawatt Hour (GWh)
A measure of electricity consumption equivalent to the use
of 1,000 megawatts of power over a period of one hour.
Global Reporting Initiative (GRI)
The world's most widely used sustainability standards. An
independent,
that helps
international organization
businesses and other organizations take responsibility for
their impacts by providing them with the global common
language to communicate those impacts.
Greenhouse Gas (GHG)
A gas that has the potential to retain heat in the
including water vapour, carbon dioxide,
atmosphere,
methane,
hydrofluorocarbons
nitrous
and perfluorocarbons.
oxide,
ICFR
Internal control over financial reporting.
Emission Performance Credits.
IFRS
Force Majeure
Literally means “greater force.” A clause in a contract that
excuses a party from liability if some unforeseen event
beyond the control of that party prevents
it from
performing its obligations under the contract.
Free Cash Flow (FCF)
Amount of cash generated by the Company through its
operations (cash from operations) minus the funds used
improvement or
by the Company for the purchase,
the
maintenance of
improve
the
the Company
or
efficiency
(capital expenditures).
long-term assets
capacity
to
of
International Financial Reporting Standards.
Megawatt (MW)
A measure of electric power equal to 1,000,000 watts.
Megawatt Hour (MWh)
A measure of electricity consumption equivalent to the use
of 1,000,000 watts of power over a period of one hour.
Merchant
A term used to describe assets that are not contracted and
are exposed to market pricing.
274
TransAlta Corporation 2023 Integrated Report
NCIB
Normal Course Issuer Bid.
OM&A
Operations, maintenance and administration costs.
Other Hydro Assets
The Company's hydroelectric assets located in British
Columbia and Ontario and assets owned by TransAlta
Renewables, which
the Taylor, Belly River,
Waterton, St. Mary, Upper Mamquam, Pingston, Bone
Creek, Akolkolex, Ragged Chute, Misema, Galetta,
Appleton and Moose Rapids facilities.
include
Planned Outage
Periodic planned shutdown of a generating unit for major
maintenance and repairs. Duration is normally in weeks.
The time is measured from unit shutdown to putting the
unit back online.
Power Purchase Agreement (PPA)
A long-term agreement established by regulation for the
sale of electric energy to PPA buyers.
PP&E
Property, plant and equipment.
Sustainability Accounting Standards
Board (SASB)
Connects businesses and
investors on the financial
impacts of sustainability. SASB Standards identify the
subset of ESG
financial
to
performance in each of the 77 covered industries.
issues most
relevant
Task Force on Climate-Related Financial
Disclosures (TCFD)
Designed to solicit consistent, decision-useful, forward-
looking information on the material
on
impacts
and
climate-related
financial
opportunities,
including those related to the global
transition to a low-carbon economy. They are adopted by
in G20
all organizations with public debt or equity
jurisdictions for use in mainstream financial filings.
risks
Total Recordable Injury Frequency (TRIF)
Tracks the number of more serious injuries and excludes
minor first aids, relative to exposure hours worked.
Turbine
A machine for generating rotary mechanical power from
the energy of a stream of fluid (such as water, steam or hot
gas). Turbines convert the kinetic energy of fluids to
mechanical energy through the principles of impulse and
reaction or a mixture of the two.
Renewable Energy Credits (REC)
Turnaround
All right, title, interest and benefit in and to any credit,
reduction right, offset, allocated pollution right, emission
reduction allowance,
renewable attribute or other
proprietary or contractual right, whether or not tradable,
resulting from the actual or assumed displacement or
environmental
reduction
characteristic, from the production of one MWh of
electrical energy from a facility utilizing certified renewable
energy technology.
emissions,
other
or
of
Periodic planned shutdown of a generating unit for major
maintenance and repairs. Duration is normally in weeks.
The time is measured from unit shutdown to putting the
unit back online.
Unplanned Outage
The shutdown of a generating unit due
unanticipated breakdown.
to an
Renewable Power
Value at Risk (VaR)
Power generated from renewable terrestrial mechanisms
including wind,
biomass
with regeneration.
geothermal,
solar
and
Spark Spread
A measure of gross margin per megawatt (sales price less
cost of natural gas).
A measure used to manage exposure to market risk from
commodity risk management activities.
TransAlta Corporation 2023 Integrated Report
275
TransAlta Corporation
TransAlta Place
Suite 1400, 1100 1 St SE
Calgary, Alberta
Canada T2G 1B1
403.267.7110
www.transalta.com
In an effort to be environmentally responsible, please notify your financial institution
if you are receiving duplicate mailings of this annual report. The TransAlta design and
TransAlta word mark are trademarks of TransAlta Corporation.
This report was printed in Canada. The paper, paper mills and printer are all certified
by the Forest Stewardship Council, which is an international network that promotes
environmentally appropriate and socially beneficial management of the world’s forests.